“Sorry, we do not accept American Express.”
These are seven words I hate hearing. If you’re a loyal AmEx user, you’ll agree. It’s frustrating when you want to pay for something but you can’t. All of this drama because of what? Merchant fees?
An analyst at American Express explained the inner workings of a relationship between a small business and American Express.
He started off by telling me about the card’s discount rate — a fee paid by merchants to credit card processors. This is the fee that small merchants are always trying to avoid.
American Express has a discount rate between 2-3 percent. Based on how large the merchant is and what type of business it is, American Express will determine their fee, which will be locked in by a contract.
Debit or Credit?
This rate is not necessarily higher than other credit card companies. The analyst at American Express pointed out that a lot of merchants are confused when it comes to debit and credit rates. When merchants accept cards such as Visa and Mastercard, but the customer chooses to use their card as debit, the transaction has a smaller discount rate, usually one percent. Merchants see the one percent on their statement and assume that they’re paying less with those cards, but they’re not. AmEx can only be used as credit, which results in merchants only having to pay one fee.
American Express has an annual purchase volume of $888 billion. To me, it doesn’t make sense as to why small business owners wouldn’t want to accept the card.
“American Express cardmembers are willing to spend more and be more loyal to their cards by only going to businesses where their card is accepted,” the Analyst stated.
The Real Benefits of AmEx
To see if small businesses actually found it beneficial to accept American Express in their establishments, I spoke with two people who run a small business in the Los Angeles area. I sat down with Matt Wise, general manager of The Roger Room, a cocktail lounge. “It’s really worth the small fee,” said Wise.
He agreed with my feeling of astonishment when retailers won’t accept AmEx cards. “I prefer when it is easy to exchange goods and services. Any friction in the process can detract from the experience itself.’”
Lillian Cavalieri is the founder and CEO of iPrecinct LLC, a political data technology company that provides campaign software to enhance overall quality of game strategy. She also happens to accept American Express and enlightened me on just how beneficial it can be to have this card on your side from a business owner’s standpoint.
“We have way more sales using American Express. Thirteen percent more,” said Cavalieri.
In fact, Cavalieri said customers would frequently ask if iPrecinct accepted American Express, to the point where she put up an icon on her site notifying the public that they do take it.
She also informed me American Express is excellent when it comes to discrepancies. She said if there is an issue between the business and the customer, American Express will resolve it within 24-48 hours, unlike other cards that can take two to three business days to fix the problem. This allows Cavalieri to deliver faster service, which is key to a business that is built on delivering data quickly.
The source at American Express said the number one customer complaint is why a merchant will not accept their card. Once this happens, American Express will actually call the merchant to find out why they don’t use them and to see if they will start.
(Disclaimer: MyBankTracker was not compensated from American Express for writing this article.)