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Why Do Merchants Dislike American Express?

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I like my American Express True Earnings Costco card because it gives me 1% cashback, no cap, on everything and 3% at restaurants (though that was trumped by my Citi mtvU card with 5%) and 2% on travel. It’s my backup card when another one doesn’t supersede it (like the Citi mtvU card) with a better offer because the cash back from American Express doesn’t have an annual cap whereas other cards do. However, if you’ve noticed, American Express (and Discover) seems to always been the odd card out when you go to a lot of merchants and while I’ve always heard it was the fees, I wanted to dig a little deeper to find out why Amex was so hated.

According to the North Carolina Office of the State Comptroller and this Schedule of Fees document, a $100 transaction on a VISA card results in fees of $1.62. MasterCard clocks in at $1.80 and American Express comes in a $2.19 (this is for the “best government rate,” whatever that means)

How does this compare to someone like PayPal? If you have their lowest merchant option, sales less than $3,000, you’re looking at fees of 2.9% plus 30 cents. So on $100, you’d be paying $3.20; more than Visa, MasterCard of American Express. (If you use Google Checkout, it’s fee free until the end of the year)

Anyone know why merchants hate American Express (and Discover)? Is it just the fees?

{ 128 comments, please add your thoughts now! }

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128 Responses to “Why Do Merchants Dislike American Express?”

  1. Jason says:

    I am curious to know what Merchants and busniess owners think about the latest tactics by American Express to offer reloadable prepaid cards such as the latest “Bluebird” card created by Walmart and AMEX to serve as a “checking account alternative.” Is it true that companies like Costco receive a much lower transaction fee becuase they offer a Costco AMEX card accept AMEX as their only form of credit card payment? Amex is trying to tap into the low income consumer market with their new prepaid cards, yet trying to use AMEX and even Discover Card can be difficult when you have to always first ask if the merchant accepts them. At one time you were known as a bad ass if you had an AMEX or Discover card and the merchant fees were always expensive. Now, you can get both cards in the form of prepaid – so why hasn’t AMEX and Discover lowered it’s merchant fees? Please note that I once had a Discover card and the credit limit was much higher than my Visa and Mastercard, yet much less accpeted – even Macy’s wouldn’t take it at the time.

  2. Eric says:

    As a merchant I am tired of paying Amex 1/2 to 1/3 more than Visa MasterCard and having to wait 4 days to get paid, when Visa MasterCard will pay me next day. I think we should strike back against Amex. The next biggest shopping season is Back To School/College, which did $84 Billion last year, almost 20% of Christmas. Since about 48% do their shopping 1 month before school starts, I suggest all retailers do not take Amex starting Saturday August 3, 2013 through Sunday August 11, 2013.

    • Tom says:

      Eric,
      Your are a short sighted business man. If I came to you and said Eric, I am a business developer and I will bring you $100,000 in new business and all I ask is 3% of the sales. No upfront, No contracts, No other fees.

      YOU WOULD JUMP ALL OVER THAT

      When you stop accepting AMX, I stop my business with you. That simple. If your business model is so shaky that getting paid 3 days later even enters your mind, you are probably going out of business. If your service or product is so marginal that your prices cannot be increased 1%, you should improve your service or product. It is a fact that AMX members spend more than any other card.

      • Rhonda says:

        I agree with Tom! I love AMEX! Because of their rewards, I use it as my prime card! It is the ideal card for large purchases because of no cap. Well some have a cap. As a business owner, I accept AMEX, which is used more by other businesses to buy my product then Visa or MC

        • Rick says:

          It’s not just AMEX. It’s all cards.

          Tom, of the 100k 3% sounds minimal but after COGS, payroll and occupancy costs, that 100k gets whittled down to about $10,000. So really you’re asking for 35% of the profit. And profit is not a dirty word – it’s my paycheck. In the food business there is also tax and tip, neither of which is my money, but I will have to pay fees on them too. 100,000 + 7% tax + 20% tip = 127,000 x 3%. $3810. Almost 40% of the profit. Being in the pizza business the effective rate is often all the profit after the .20 swipe fee. Take the 100k @ $5.00 per sale. 20,000 swipes $4,000 + (3% x 107,000) = $7,210.00. A 1% price increase will not cover that. At that point, no matter how many slices you sold, it would be nearly impossible to earn a living.

          Rhonda, the rewards seem nice but you are paying for them in the prices you pay for products. If you had a .50 charge on you cc statements for every item you paid for with credit, would you continue to consider the rewards a good deal? Would it seem reasonable to pay 20, 30, $40 per month for all those coffees, lunches, slices, movie tickets? The cc companies know most consumers would discontinue use of their card and that’s why they prohibit any vendor fees.

          I started accepting cards 2 years ago. So far the majority of cc sales have been former cash customers now paying with credit. I have had increase in some customers that used to leave without making a purchase previously because they do not “carry enough cash” to buy a $6.00 lunch. Credit card fees are expected to surpass my rent in the near future.

          Ultimately, I do believe that plastic does have its place, but not for every single purchase we make. I also feel they contribute to inflation.

          • tom says:

            Rick,

            Your numbers are cute. Like saying to an employee that wants a day off: There are 365 days per year available for work. There are 52 weeks per year in which you already have 2 days off per week, leaving 261 days available for work. Since you spend 16 hours each day away fron work, you have used up 170 days, leaving only 91 days available. You spend 30 minutes each day on coffee break which counts for 23 days each year, leaving only 68 days available. With a 1 hour lunch each day, you used up another 46 days, leaving only 22 days available for work. You normally spend 2 days per year on sick leave. This leaves you only 20 days per year available for work. We are off 5 holidays per year, so your available working time is down to 15 days. We generously give 14 days vacation per year which leaves only 1 day available for work and I’ll be darned if you are going to take that day off!

            By the way, I you saying you would turn down the deal? Your average sale is $5.00?

      • Mustang says:

        Tom – I own a paint and body shop. I am not giving AMEX 4-5% of a large ticket. Sometimes they would make more on the transaction than I would, risk free. I reserve the right to accept whatever card I want.
        MC and VISA charge 1.75% and provide the funds faster

  3. Shaboo2 says:

    If merchants are smart, they conform to the customer and provide what they want at a reasonable price. I have certainly heard from merchants who dont like Amex bc of the cut Amex takes. Yesterday, I was told directly by a merchant that they accept Amex cards but they hate doing so . So I said, well let me pay you with a visa card. I pulled it out of my wallet and it happened to be an airline rewards card. She then said, oh we hate those too bc we get charged extra for cards like that. (My Amex was connected to Starwoods by the way). So said “Cash is King!”

    Well maybe so, but the ONLY reason I sign up for any card is bc of their rewards program. She has a right to not accept any cards, but I also have a right to maximize the benefits of my card, and indeed, why wouldnt I?

    I said “No cash. Pick a card or Im leaving” She reluctantly picked the visa card, but needless to say, I am going from a repeat customer of her store to not being any customer of her store. If you want us to buy, then keep up with us. And don’t be stupid enough to complain to the customer about your gripes. It was like I was at fault for something.

    And that’s life.

  4. rl says:

    i tried to purchase a used 2010 car on AmEx … that
    the auto dealer couldn’t accept the card has a huge
    disappointment … so had to go with Visa.
    I so prefer
    AmEx for their accessibility & customer service.
    But what can one do if a merchant can’t or won’t
    accept the card.?

  5. Lifesabeach says:

    I work for Amex in Merchant Aquisition and deal with CFOs and Business Owners who have no idea how they are being charged credit card fees. Sounds like there is a couple commenting here. Visa/MC/Discover all are applies to a system of fees called Interchange. This adds a different fee depending on what type of card is used that is applied on top of the merchants base rate and transaction fee. Thats 3 fees with one potentially changing throughout the month. Interchange Rates can range from somewhere in the 1%+ range to 3%+ range which is applied to your base rate of 1+% and a transaction fee that can be as high as the processor wants typically .10-.20 cents per transaction. once you add up all the fee at the end of the month (Net Effective Rate) you will have your rate. Amex charges one rate for all transaction with a transaction fee regardless of the type of card used. So you can see, you rate with Visa/MC/Discover is not 1.6%, that is where it begins… Statement analysis is not easy but next time you claim Amex is too expensive make sure you understand its probably much closer than you think or less expensive.

  6. SL says:

    I hate accepting AMEX. I would be fine with their cut if they weren’t so rude on the phone and if they didn’t have policies that hurt our business. One just hung up on me, and no–I wasnt yelling or using any profanity whatsoever. They are making it difficult for us to do business with their policies. Our business always charges up front to our clients and they receive their product within a few days. But AMEX has a ridiculous policy where you can only charge 50% now and receive 50% after the product is delivered. Our clients would rob us blind if we allowed that! Our industry tends to be a little on the shady side when it comes to paying bills. So to make a long story short, they would not allow two of our clients to buy product from us, and reversed the transactions on both cards! I hate American Express. I really wish enough merchants could get together to boycott.

  7. SGC says:

    I would love to spend more at some of my favorite merchants but I buy online instead because they take AMEX. Square just charges one rate, how can they do that?

  8. Jerry says:

    If I go to an establishment that does not accept an American Express card, I go to an establishment that does. It may take a little of my time, but as soon as these places start losing customers, they may change their minds.

  9. Terry says:

    Intersting comments from merchants. I’m considering being able to accept AMEX for my business. As a consumer, I love AMEX

  10. Rick says:

    So the name of this article is: Why Do Merchants Dislike American Express?

    Too bad he never got around to addressing that question.
    Instead he solicits responses from the readers who have no idea “Why Do Merchants Dislike American Express?”.

  11. doug says:

    As a small business owner I have found ALL my customers that try to use AMEX are use to being told no. So much so, they ALWAYS have a different card – ALWAYS. I can honestly tell you I have never lost ANY business because of our no AMEX policy. However I have saved $1000′s in fees because of their unusually high fees they place on merchants. 4-5% is crazy.


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