Average Credit Card Fees For Businesses – As an American Express cardholder, it can be frustrating when you go to pay for something only to hear the words, “we don’t accept American Express here.” This is something that happens all the time.
Amex is known for providing exceptional customer service and a variety of member benefits. So why don’t all businesses accept this payment method?
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Merchants don’t feel as positive about Amex as cardholders do. In fact, even businesses that accept Amex aren’t always happy when a customer pays with an American Express card.
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So why are retailers, small businesses, and various industry organizations adopting Express Delivery? Find out why below.
It’s safe to say that you can pay with Visa or Mastercard at any business that accepts credit cards. But that’s not always the case with Amex.
When comparing the four major credit card networks (Visa, MasterCard, MasterCard, and American Express), Amex has the highest processing fees.
Obviously, the actual price charged by the seller will depend on many factors. You can check out our complete guide to currency exchange and pricing for more information on this topic.
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But let’s do a quick comparison here based on these values. Here’s a good example, using the low rate for Visa and the high rate for Amex, let’s say a business processes $50,000,000 in credit card sales per card type each month.
Before $0.05 per transaction, processing fees, and other fees, merchants pay $645 to exchange with Visa at a rate of 1.29%. But they can pay $1,650 in Amex exchange fees for the same amount. Not to mention Amex’s additional transaction fee is double that of Visa ($0.10 vs $0.05).
I know this example goes a long way, but you get the point. Amex transaction fees can be up to 2.5x more than Visa.
On average, this can cost retailers tens or hundreds of thousands to process each year.
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To better understand why Amex is not accepted by everyone, it is important to know the difference between Amex and other credit cards. Compared to Visa and Mastercard, the main difference is that Amex offers their own credit cards.
As the name suggests, banks issue cards to cardholders. They work directly with the cardholder. Before a credit card can approve or decline a sale, the issuing bank must verify the transaction.
Issuing banks are also responsible for things like setting cardholder interest rates, managing cardholder communications, coming up with cardholder reward programs, setting foreign transaction fees, etc.
Let’s say you have a Visa cardholder who has a question about their benefits or wants to dispute it. They don’t call Visa directly; they call their issuing bank.
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When you look at Visa or Mastercard, you will usually see the issuing bank listed on the card.
As you can see in the example above, Bank of America is the bank that issues this Visa credit card.
The American Express card is only accepted at Amex. You cannot withdraw it from someone else’s bank account. All services provided by the bank are carried out under one card house. Discovery is a credit card and banking network.
Based on what we already know about the role American Express plays in the business process, you can see that the company has more operational responsibility than Visa and MasterCard.
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This next section is somewhat subjective and open to debate. But overall, American Express is also known for offering great rewards and customer service to its cardholders.
Another reason some businesses don’t accept American Express is because they feel they’ve been bullied by credit card networks in the past when it comes to payments or disputes. Again, this is good news for cardholders, not always good news for merchants.
Even with the large amount of money and their reputation for supporting different cardholders and merchants, every business should be able to accept a large network of credit cards these days. Also, the perception that Amex isn’t universal is starting to fade. Nilson’s 2020 report says Amex is accepted at 99% of places in the US that accept credit cards. American Express proudly displays this information on its website.
That’s because American Express has taken steps to make credit cards easier for all communities, including small businesses.
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For example, the Amex Shop Small Initiative has been encouraging cardholders to spend money at small businesses. In 2020, Amex rewarded cardholders $5 to 10x on purchases of $10+ at small businesses on certain days.
The small business investment program is expected to generate $19.6 billion in sales for local U.S. businesses. last year in 2019.
It’s no secret that American Express is expensive for merchants to process. While there is nothing you can do about the transaction fees set by the card network itself, there are other ways you can save money on credit card processing.
Contact our team here at Merchant Cost Consulting. We’ll give you a free analysis to find out how much you can save on processing costs, without changing your processor.
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Prior to founding Price Merchants, Colin worked in the payments industry for 3 years gaining in-depth industry knowledge. Meanwhile, Colin realized how deceptive the industry could be and wanted to do something about it. Before entering the payroll industry in 2014, Colin played professional baseball for the Los Angeles Angels of Anaheim. Colin is from Waterford, CT and earned a BA in Business from Virginia Tech where he was a member of the varsity baseball team.
Merchant Cost Consulting is a cost reduction company that helps businesses reduce their credit card processing costs for merchant services without disrupting their day-to-day operations. If you’re on the Galaxy Fold, consider opening your phone or viewing it on full screen to enhance your experience.
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For the first time in two years, Visa and Mastercard are extending their merchant credit cards in April 2022.
Delayed by the outbreak, the move by two major payment networks to increase “clearance fees” has been criticized by retailers. Transaction fees, which are charged by merchants for each credit or debit card transaction, can hurt the currency and discourage consumers because businesses may choose to offer consumers higher transaction fees, investors say.
Both payment channels have increased payments for certain types of sales and reduced processing fees for certain categories. Traders say the reduction is temporary and does not prevent processing fee increases.
Many merchants need to accept credit cards, making credit card processing fees a cost of doing business. For more information on possible fees – and the differences between credit card companies – we’ve gathered all the latest information.
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Merchant credit card processing fees range from 1.3% to 3.5% of each credit card transaction. The exact amount depends on the payment channel (eg, Visa, Mastercard, Discover, or American Express), the type of credit card, and the merchant category (MCC) of the transaction.
Note that credit cards have different pricing options, and are often cheaper at merchants. This is why you can only get cash with a credit card, not a debit card.
Sources: US Visa Payments Released April 23, 2022, Mastercard 2022–2023 US Territories Exchange Plan and Rates, Wells Fargo Merchant Services Payment Network Pass-Through Program, and Wells Fargo’s Payment of Qualification Matrix from 22 April 2022.
That list includes two types of fees charged by payment networks for each transaction: transaction fees and review fees. They do not include payment processing fees, as fees vary widely depending on the credit card you choose.
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Now, let’s take a closer look at the fees charged for all credit card transactions.
The two fees we looked at above, transaction fees and processing fees, are non-negotiable credit card fees for merchants. They are often called base costs or discount rates. The payment network pays this fee for every transaction involving their card. Here’s where that money goes:
The bank that issues the credit card accepts the transaction fee. For example, if you have a Chase-issued Visa credit card, Chase gets the money for your purchase.
The payment channel received the check fee. In the example above, Visa earns a fee per transaction when you use yours
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