comments
Why Do Merchants Dislike American Express?
Email
 Print
|
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?
{ 120 comments, please add your thoughts now! }Related Posts
 By Jim |
 Stumble It! Bookmark reddit.comTags: American Express Jun 16, 2007 | Read more in Credit |
Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.
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.
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.
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.
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
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.
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?
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.
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.?