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. John Hess says:

    As a customer, I often refuse to dine or shop in a restaurant, which do not accept Amex because: 1)They do not accept Amex b/s it is too expensive for them, which means they have too low profits and most likely have to cheat customers on quality of goods to save money; 2)They may have lost an Amex account due to high volume of customer complains; 3) I want to maximize points earning and spending; 4)The more I spend with Amex, the higher my allowable credit limit with them; 5) Amex has good return merchandise policy. I RARELY return to the merchant who has refused to accept Amex.

    • Realkman says:

      John, I will not go into specifics but you are delusional about Amex. Amex is bad for businesses and bad for the economy, though it may be good for you+.. until they screw you as well.. and TRUST ME, they will. You would not believe me if I told you all the stories.. Good luck..

  2. Panagiotis says:

    In contrast to Visa and Mastercard (who pay almost immediately), American Express can take up to two months to pay. Since time is money for retailers, this is the primary reason (not the small difference in fee), that retailers won’t accept American Express cards, according to many creditable surveys.

  3. Adam says:

    One thing that is not talked about much and to be fair should be is the practice of “Non-qualified rates” being added only on Visa and MasterCard transactions.

    Basically, the discount rate is applied to your transaction as agreed (1.75%); but then if the card holder used a “non-Qualified rate” card; which is any corporate/business Visa/MC or Rewards card then the merchant gets hit with an additional non-qualified rate of anywhere from 1.5-2% plus a .10 per transaction charge.
    I get the idea here, Visa/MC want to offer the special incentive or rewards cards, but they don’t want to pay for them. They pass that burden on to the Merchant.
    I recently learned this the hard way when a client who used his MC to purchase a $11K item from us (because he wanted the travel points).

    That one transaction ended up costing us a combined total of 3.75% plus .10 transaction fee. In the interest of full disclosure we also have a monthly fee of $20 for accepting Visa/MC. So over $400 went to MC. We were calculating a normal rate of $200ish, that is significant when considering trying to make a profit.
    Now if we would have taken an AMEX for that transaction, it would have been around $280ish and he would have gotten his points too.
    That wouldn’t have been so bad accept that our non-quals for that month were $24K for all transactions, which is steadily climbing percentage wise since everyone out there wants something for free, (somebody always pays for free!).

    As a final blow to this, Visa/MC require all merchants to accept all cards regardless of non-qual rate or normal rate; no discrimination is allowed. As merchants we have to just take it, now we look at our prices to the consumer and reset those prices accordingly.

    Our preference would be Cash, Check, Debit, then smile as we accept Amex and Visa/MC hoping for the best!

  4. Mini split says:

    With our merchant account, American Express Transactions are deposited in our account in 24 Hrs and the fee is only 2.5%. I dont know how but it is true.

  5. Call says:

    I have been getting offers from AMEX all my long life and have disposed of them all. Their pitch always seems to be that I have been carefully selected to join the elite. Well, if my ego grip is going to increase the cost of goods, that doesn’t seem quite rational to me. They say I will have no preset spending limit. I am smart enought to know there is a limit; I am simply not told what it is. My old well-worn MC is kept at $10,000 over my largest monthly expenditure. Now at $30,000, which is academic, as the card issuer is always vigilant and will intervene if something appears askew, and appreciate that. So, why should I plop down an expensive AMEX card and ruin my small business merchant’s day?

  6. Carlo says:

    I disagree with Dano. Sam’s Club does not accept American Express but DOES NOT accept Visa either. Only M/C and Discover is accepted.

    Other billion dollar retailers such as Costco only accept American Express and others like Dollar tree DO NOT accept M/C.

    For consumers Amex has a lot of perks and for merchants they just have to do their homework and hope for the best.

    • Krusty says:

      As mentioned long ago, we stopped accepting American Express cards because the fraud rate was so high and we ALWAYS got stuck with the loss by American Express.

      In our experience, Visa, MC, and Discover have much lower fraud rates and occasionally support the merchant in disputes (unlike American Express).

  7. Louis says:

    For me it had nothing to do with fees.

    I read an agreement for AMEX. I originally intended to accept AMEX cards.

    It said, to paraphrase the long document in tiny font, that they handle chargebacks without contest. Let’s say I perform a service, and it is perfect. The customer files a chargeback. AMEX gives the customer their money back and can do so without contacting me or giving me a forum to argue whether or not the chargeback is legitimate. What I read when could be interpreted as meaning a customer could file a chargeback and have it ruled in their favor automatically because the merchant has no right to contest a chargeback.

    Many argue that “if you do good work and sell good product no one will issue chargebacks.” I live in Bed Stuy, Brooklyn. I bend over backwards to accommodate every customer I can, but I see enough everyday to know not to trust my money to the honor system!

    The policies I read in their merchant agreement from the merchant services company that issued me the documents read like a collective cock in the ass of every small businessman who signs it. I’m not opening myself up to more risk than I already take on as is. With the pricing I offer I’ve never lost a customer due to lack of AMEX acceptance. However, even if I did on a daily basis, it’s the point. I’m not taking on that kind of risk just because AMEX customers want to strongarm merchants into it.

  8. HRP says:

    We have a small business and have been stiffed twice by AMEX. We are done with this company! We have been in business for over 10 years with thousands of satisfied clients. We have had two wacky people really cause us some substantial loss. All they have to do is tell AMEX some crazy story of how dissatisfied they were and “POOF” their money is refunded. Sure they give the merchant a chance to defend themselves. We presented evidence of how service was provided in an exemplary manner. But in our experience, it mattered ZERO! DO NOT TRUST AMEX as a merchant! Now we have checks bouncing like crazy…and we did nothing wrong. It is insane. Criminal- really!

  9. Don says:

    I have taken amx for 23 years as a merchant. Until today that is. If you are a merchant taking amx, it is just a matter of time before they screw you, and how bad they do it. Never, Never, Never, take Amx.

    • Coitus says:

      They are a bit of a challenge to deal with at times. Makes you begin think about alternatives especially considering available technology these days. Think them or the other two will be able to keep up?

  10. Bronga says:

    I’ve been accepting amex for 17 years now and i’ve had my ups and downs but what i realised was as much as we are merchants,we are consumers as well and we want to be treated with respect when we decide on the payment method we choose, i wouldn’t like someone telling me how to pay when i’m making a purchase,don’t y’all?? We keep complaining on how expensive the fees are for us and so on but do we think about our customers???they are the main reason why we’re in business and we don’t respect their payment method?? we want to make the most profit from our customers and we complain when our customers wants to make the most out of their membership rewards points,they get their rewards only if they spend with us which means more business for us and we on-charge?? Business is not only about profit, its about our relationship with our customers.

    • petergood says:

      well said a customer should be able to pay how they like. A good business plan accounts for all costs be it real or potential when setting prices, credit card fees and other costs of business. I have an Amex and other than my visa debit card its the only card I use. If a merchant tries to convince me to use another form of payment I leave, lost sale mr merchant, and if they say they dont take amex sure ill pay with my visa debit but guess what I’m not going back. Amex has always treated me great, they did lower my limit recently but hey so did everyone in that industry its called protecting themselves, my limit was at 18k and they lowered me to 10k well big deal I never even approached that amount, all of these people who complain about amex have you ever thought about what you did? Business is a two way street and i’m sure you are without liability as you claim

      • Ex-AMEX user says:

        I did nothing. I was a good customer, I paid atleast the minimum due on time every month. About a year ago I receved a letter from them stating that due to the “state of the economy” my interest rate would be raised. I find this unacceptable. I was struggling as it was to pay my bills due to medical complications. I guess because I was not as rich as you to be affored an 18K limit I was just white trash to them and it was okay to screw me over. I stopped paying anything on card and eventually had to fill for bankruptcy. I would have continued to pay them as I had be doing but they made the decision to be immoral so I guess they get nothing.

        I am glad that I now work for a company that will not accept American Express and am happy everyday to tell my customers that we do not accept American Express and they will have to pay another way.

      • David says:

        “well said a customer should be able to pay how they like. A good business plan accounts for all costs be it real or potential when setting prices, credit card fees and other costs of business. ”

        I see. So you’re saying that retailers should raise their prices to allow for AMEX’s extortionate business practices thereby increasing prices for other customers so that AMEX customers can get points which are a tiny fraction of the fees AMEX charge. Hard to see how that benefits customers overall.

  11. Frank says:

    I work at a furniture store, we recently stopped taking American Express because we were told they are now requiring a $50,000 “escrow account” in case we go out of business. Apparently stores which take large deposits have been packing it in, taking the deposits, leaving the consumer with no option but to seek relief from AMEX. So, although we are a long-time franchise of a national chain of a furniture manufacturer. We were told they would keep 50% of all our transactions until $50.000 was reached and they would hold onto that “in case we went under” We said, No thank you, we’ll keep our money and stop taking AMEX. Only have had 1 large sale jeopardized and when we explain why to others they applaud us for not allowing this form of corporate extortion. Any other merchants out ther have this sort of problem? as I said it probably only affects businesses that take large deposits with the merchandise being delivered at a later date.

  12. Joe says:

    Interesting discussion.

    I carry the Amex Blue Cash and am careful to select merchants that accept it based on the sticker on the front door. I use this as my primary card since I accrue over $500 in rewards annually with it and never pay any interest or fee.

    Thus I am annoyed when occasionally a merchant will frown at me when presented with that card and ask for my Visa. I refuse and insist that they take the card, or they should not have the sticker on the door. Then they take it and grumble to me about the fees, the wait, and whatnot.

    This leaves the both of us irritated about the transaction. And I am not likely to come back since I feel it is imprudent for the merchant to complain about my Amex card if they advertise that as acceptable payment on the front door.

  13. Anon says:

    several reasons:
    – AMEX carries higher fees close to 3.2% well exceeding all other merchants
    – Accounting issues: VISA / MC usually settle up (transfer funds to your bank account) the same day you accept a CC. AMEX takes about 1wk after the transaction. This delay is annoying as you have paid invoices and your cash log is off every day.
    – Despite taking in over 1M per year in AMEX fees – many managers and executives in the office that tried to get a personal AMEX account were declined for various reasons (guess some companies were hurt by the credit crisis more than others…) their loss I guess.

  14. scott says:

    I might make small purchases at stores that dont take amex but if Im going to make a big purchase, 150 or more I go somewhere that takes amex. It is true I wont hesitate to whip out the Visa if they dont take amex, but I just wont come back to that merchant.

  15. AmEx User & Accepter says:

    I not only use my AmEx card as my one and only credit card, but my business has accepted it since opening in 2000.

    Are the fees for acceptance higher? Perhaps. Is not accepting it worth the cost of snubbing high spending AmEx customers? NO WAY. The customers who use AmEx in my establishment are without question the cream of the crop for demographics, and spend more per transaction than anyone in all areas of my business. Telling them “no AmEx” is like telling them “go away.” I know this because when I leave my house to make my own purchases, I carry my AmEx and my drivers license – period.

    As for AmEx deducting chargebacks from merchant settlements, this is not true. When a customer disputes a charge, AmEx notifies you in writing and you have 30 days to provide documentation. I’ve never suffered a chargeback despite a handful of disputes in ten years.

    Personally, I look at a business that accepts VISA/MC but not AmEx as being a penny-ante operation.

  16. AX says:

    I run a business and we take Amex and Visa/MC. Our solution is to make sure our business model can absorb any differences in fees from any of the cards. (As some have noted, Visa/MC rewards cards can cost more than Amex. And per Visa/MC rules you’re not allowed to discriminate against those.) And again, you’re talking about a maximum savings of about a point. Surely you can figure out some way to add a point of margin somewhere else? (If not, why are you in business?)

    It’s strange to me that nobody here mentioned being in a very low-margin business, so I’m a little surprised that more folks don’t hit on a possible answer: raise prices to cover your costs. Given a choice between a) possibly decrease your customer’s happiness in some way or b) raise prices to cover standard operating costs, we pick b. But then again our industry is competitive and we aren’t really in a position to boss our customers around.

    For the record, I also carry Amex and use it exclusively. The dry cleaner in my building is the only place I pay with MC. There’s a replacement for every other business that does take Amex.

  17. KW says:

    I AGREE with AX. I had a retail flower store for 7 years. MC/Visa was often much higher with all the various reward rates and a monthly fee of $25. My AmEx customers spent more money and it made no difference to me that it took 3 days for AmEx to fund.

    You have to remember AmEx is a CHARGE CARD not a CREDIT CARD. This is how they make money by holding it for an extra day. They have always been honest and up front with fees and rates. I only paid $5.95 monthly fee with them and No Minimums or Annual Fee. Visa/MC make it impossible to know what you are really paying because it all depends on the card the customer was using.

    I never had any fraud whatsoever with AMEX either, unlike Visa/MC who issue credit to anyone. I received about $2700 in fraudulent orders on our website with Visa cards and fortunately did not ship but was charged $10 refund fees for each transaction. So I lost out. Never would have happen with an AmEx.

    I’m at the point where I will not shop with a merchant if they do no accept AmEx and when I hear that ignorant excuse that it cost them too much I want to scream. Seriously they can not absorb and extra point to provide convenience to their customers.

  18. Brian says:

    I find it very ironic that the defenders of AMEX state the “choice” of the consumer to use whatever payment method they want.

    For all you AMEX consumers, try paying your monthly bill with a credit card. They will NOT accept that form of payment, since it COSTS them $$$.

    But wait you say, its not FAIR to pay a credit card with another (why this isn’t fair is beyond me), but OK, no CC. Well how about debit? Rejected – still costs them money. How do reconcile consumer choice with that?

    Large banks (AMEX & VISA/MC issuers) provide rewards programs on the backs of merchants. Hey what’s few percentage points of your margin small business owner, suck it up! Well 1% of gross sales translates to a much larger % profit hit. These costs are, eventually, passed on to all consumers by higher prices, which of course the less affluent (i.e. non-rewards CC users) end up paying for.

    In addition, companies like AMEX made poor business choices, and received taxpayer bailout dollars, in addition to being allowed to convert to a “bank” to receive other government aid (ability to pledge “assets” for cheap fed dollars, which they loan out to YOU at a huge margin). Interest rates are at historic lows, yet CC rates have risen, etc. etc.

    In the end it all comes down to whether accepting AMEX will increase sales/profits, which is dependent on your particular business.

  19. Robbie says:

    I have an Amex Centurion card and live in Australia. But I have lost count of the times I have been told “We only accept Visa or Mastercard”. And there’s been so many occasions I just wont use it because merchants have surcharges. Sorry, Amex a complete waste of time and money. I’d just rather use my Visa. At least I know it’s accepted everywhere and never have a problem. Try using Amex throughout Asia! Nightmare!

  20. John C says:

    I didn’t read anything in a string about long delays for payments to be posted to AMEX account. I travel frequently internationally and have AMEX as a corporate standard. For the businesses that actually do accept AMEX, I cannot do expenses for sometimes 3 weeks as I’m waiting on charges to post to my account. If I call AMEX CSR’s they tell me that they post as soon as the merchant incurs the cost. Never happens with Visa….something does not pass the smell test here!

  21. Just some FYI. By law any merchant can hold your funds for 6 months plus 30days for “investigation” Understand that 24 hour and 3days is a courtesy. There is a mix of Users/VS merchant responses where the Users love their 3% cash back not once ever wondering where AMEX gets that 3% and still makes money to employee people and own building and rake in millions per year in profit on top.
    Amex is a seperate FEE we pay even if you don’t come in and buy from us.
    If our volume is less than 20k per month you shouldn’t be doing business with AMEX is the way the math works out. Your fees will exceed your gain.
    The poor math is laughable 3.5% is not $3 dollars per thousand its 35 dollars add in a 25 / month fee and a 1k in xfers is 6% or 60 bucks per 1000.
    In a global internet sales enviroment 60 dollars profit sometimes doesn’t exist on an $800 item. Thats why companies have Cut their profits to increase their volume to REDUCE their overall FEES. Trying to get bigger slice of a shrinking pie.

    Its a question of volume.

  22. Jo says:

    As a small business owner, accepting American Express cards has been a necessary evil. The company’s customer service personnel are rude and arrogant. The perks this large corporation offers it’s card holders are paid for through extremely high interest rates charged to small businesses. Consumers should know that all the rewards such as points for air miles, cash back or other rewards, are NOT paid for by these credit card companies, but are paid for by businesses.

  23. Mary says:

    I don’t think any percentage fee to a merchant makes sense. Just because cardholders spend more per transaction then cash payers isn’t a justification for credit card companies to feel they are entitled to a percentage of that retailers profits. The credit card company is making more interest because people bought more stuff.

  24. BB says:

    With respect to the above commenter, all forms of payment entail a cost to the retailer. Cash and checks cost the time to deposit and tender them (or have an armored car pick them up for you), so arguing that “charging a fee” doesn’t make sense, well, doesn’t make sense. The card company has to maintain a staff of employees, keep lights on, and maintain secure networks to ward fraud, so these fees help keep the end consumer from paying even more.

  25. John California says:

    Very interesting discussion. What puzzles me is that there are regional differences, even in the same state, about accepting Amex. Even in cities of about the same size, the more ‘provincial’ ones have more [typically small] business than other more ‘cosmopolitan’ cities’ businesses of about the same time. My hypothesis is that a sort of local ‘urban legend’ takes hold, in which business owners engage in groupthink about excessive charges and the like. Let’s face it, given the spread on the charges, for any business worth its salt [and all the ones I’m talking about here are reasonably good businesses], the differences in costs are chump change.

    I don’t have a dog in this fight, but it seems like some people are taking surface streets because they don’t want to pay to go on the faster toll road, and then justifying it with misinformation that they share with one another.

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