Why Your Favorite Small Business May Not Accept Amex Credit Cards

The cost of accepting Amex cards may be too high for some businesses.

For most Americans, everyday shopping tends to happen in places that will take your money the way you want it to be returned. But every now and then, you will always come across companies that are a little more picky about your payment methods.

More often than not, if a business limits the type of credit cards it accepts, American Express gets the short end of the stick. This can be a big deal for fans of rewards credit cards, as Amex offers a number of extremely popular products. From travel rewards cards to cash back cards and even business credit cards – if you have multiple rewards cards, there’s a good chance one of them says “American Express” on it.

Considering the undeniable popularity of Amex cards, why are they more often than not the ones you can’t use? Like most things these days, it all comes down to their cost: Amex credit cards simply cost businesses more money to accept. As a result, some businesses, especially small businesses with low profit margins, simply choose not to do business with Amex at all.

Businesses pay multiple credit card fees

To understand the problem, you need to understand the basics of how credit cards work. Credit cards represent a line of credit with a bank, which we call the credit card issuer. When you make a purchase at a business using your card, the transaction must be sent to your issuer and the money must flow back to the business.

Most companies work with a credit card processing company, which provides the card terminal where you use your card. The processor is responsible for sending transaction information to the credit card network, which acts as a bridge between the processor and your issuing bank.

Once the issuer approves the transaction, the payment is returned through the chain. As you would expect, everyone expects to be paid for their services. This means that each credit card transaction has its own fees.

  • Payment processing fees: This is the cost paid by the company to the processing company.
  • Assessment fees: These charges go to the credit card network. (In the United States, this is usually Visa, Mastercard, Discover, or Amex.)
  • Interchange Fee: The bank that issues your credit card collects these fees.

The total cost of a credit card transaction varies widely depending on a number of factors, such as the type of transaction and the type of card. Premium rewards cards may have higher fees. But, of course, the main determinant is the companies actually involved.

Amex tends to charge higher fees

American Express acts both as a credit card issuer and as a credit card network for its cards. This means that it controls both the valuation and the interchange fees – and manages to keep them both.

When it comes to setting fees, Amex doesn’t believe in underpricing. Of the four major credit card networks, Amex has the highest fees on average, charging more than a percentage point higher than its competitors in some cases.

When you’re a small business that’s already running a profit margin of a few percentage points, paying more than an extra 1% to a credit card company can make a huge dent in your bottom line.

In some cases, merchants can pass this cost on to the customer through credit card surcharges or convenience fees, but these are usually only allowed under specific circumstances. It’s often easier not to accept Amex cards at all and hope your customers understand.

It pays to diversify

As annoying as it can be when your favorite corner store isn’t accepting your favorite rewards card, it certainly makes sense for any small business to be wary of the added price tag associated with accepting Amex cards. And it’s usually not very difficult for customers to keep more than one credit card on hand, especially since there are more than few good reasons to diversify your card collection.

Along with making sure you have a wide range of cards, it’s also important to diversify your collection if you want to maximize your credit card rewards. Two or three cards with free bonus reward categories can quickly increase your winnings. Having a few credit card accounts in good standing can also be good for your credit score, as lenders like to see that you can manage multiple credit accounts responsibly.


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About Joan Ferguson

Joan Ferguson

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