As merchants are well aware of, credit card processing of American Express is more expensive to process than their main competitors Visa and MasterCard. On average, a Visa or MasterCard will cost approximately two percent per transaction while American Express will cost a merchant three percent. These numbers are averages, but regardless of a merchant’s total monthly transactions, American Express is typically 50 percent more in cost.
Why is American Express more expensive than Visa and MasterCard?
While Visa and MasterCard allow consumers to carry a balance, American Express does not. These balances accrue interest, and this is a source of revenue for a typical credit card company. American Express requires its customers to pay their balance, in full, each month. Although there are a few odd ways that American Express earns revenue other than transaction fees, it is through the swipe fees that the lion’s share of their revenue comes from. Therefore, they must charge higher credit card processing fees to process an American Express transaction.
Why do merchants accept American Express cards?
Consumers who qualify and use their American Express cards have an income that is well above the median income for an American. For many businesses, this is a customer that is sought after. They have more money to spend, and a merchant wants to make it as easy as possible to make a purchase for a product or service. Business owners without merchant accounts that enable them to accept American Express will likely lose the business to a competitor that does.
Other attributes of an American Express card holder
Besides higher incomes, those having an American Express card or more likely to use their credit cards than the average consumer. Even though a prospective customer is affluent, they may not have the cash on them to buy what a merchant is offering. Without accepting an American Express card, a sale will be lost. Another attribute of the American Express card user is that they tend to spend more money per transaction than those using the more common credit cards.
Should a business owner accept American Express?
In the past, this was an easier question to answer. Depending upon the type of business a person had, and where it was located, the type of customer patronizing a business dictated whether it was worth accepting American Express. Today, the customer is ordering products and services over the Internet from businesses that operate online and offline. This means that a business owner is more likely to have affluent customers than in the past, regardless of where the business operates or the product being sold. Those business owners not accepting American Express in the past may want to reconsider and use merchant accounts that enable the use of American Express.