AMEX Takes 4%

At work, we recently stopped accepting American Express cards. (Sorry Bridget!) Since the restaurant I work at is located in a place that garners a lot of traffic from business executive types who tend to use American Express, I asked why the decision had been made to get rid of it.

American Express charges 4% to businesses for all purchases made using an AMEX credit card. I almost spit out my water when I heard this number.

Although I’d like to believe I’m pretty informed on how my credit card works, I realize that I have not bothered to research the way it works from the business’ perspective. I knew that businesses were charged a “small fee” for offering credit card payment options, but I didn’t realize how much it was.

The restaurant I work at hosts several large parties in a month. Over Christmas even more-so; last week we had Christmas parties four out of the five nights that the restaurant is open for. These party bills are often in the several thousand dollar range, and are very often charged to a business account, which tend to be AMEX credit cards.

Let’s do some math :

$5,000 x 4% = $200.00

 

On a $5,000 bill, the restaurant immediately gets $200 sliced off of the top. Add in all of the costs that come with running a business (staff, supplies, mortgage, bills, upkeep) and the amount of profit can become very small.

I don’t really like the idea of giving more of my money to the credit card company rather than the business I am purchasing from itself. That being said, I don’t think it’s enough motivation for me as a consumer to not sign up for the credit card that works best for me. If that happened to be an AMEX card I would use it because retailers have the option not to accept it and as a consumer I think that we should be able to use whatever tools we can to our advantage financially.

Would you use a credit card that took a large percentage from retailers?

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Comments

  1. I used to work in retail, and I believe most credit card companies take around 3-4% (at least in the states). It’s crazy how high the fee is!

  2. I agree 3-4% is pretty standard. AE is the highest, but I am surprised that a restaurant that has a lot of business traffic would do away with it. AE is one of the most popular cards for corporate cards.

  3. It is the business’s choice what they accept and I will use what works best for me. I need to get my cash back!

  4. If a business accepts a card like that, I expect that the costs are built into their bottom line, so I may as well use it. That said, if a small local business doesn’t accept those cards, I still shop there. I just use a different card.

  5. LadyCourtney says:

    Maybe this makes me a jerk – but for large businesses I could care less if my transaction is costing them lots of money. When I shop small businesses, I take out cash and can usually cut a deal on the spot for not using my credit card.

  6. Amex has to pay for all the perks that come with their cards and the interchange fees are part of that formula. I tend to prefer some of my other cards over my Amex (use it pretty much only at Costco) and it really has nothing to do with how much they charge retailers, it has to do with my ability to earn rewards/cash back quicker.

  7. It’s crazy, isnt it? I work in a funeral home and it’s pretty hard to stomach paying AMEX 4% on a $10,000 funeral bill! We dont take AMEX for that reason. We only take Visa and MC and I think we pay them 2-3%. It’s still a lot.

  8. I’m not surprised credit card companies take a cut, but 4% does seem high… though the perks of Amex ARE expensive to give their customer base, especially since with Amex you’re expected to pay off your balance in full every month so assuming most people do that, Amex isn’t collecting interest from their customers the way Visa and Mastercard do.

    I do find a bunch of places don’t take American Express, and its probably because of the cost. Small businesses almost never do, unless they have a high price point on things (ie. the spa I go to is a small local business but because spa services are so expensive they can justify paying for Amex because its worth it financially and is also probably a popular card amongst clients).

    Since getting my AMEX I really like it. The customer service is mindbogglingly amazing and the whole point system is pretty wicked too. Looking forward to my Holt/Coach gift cards and my free flight to Toronto!

  9. I usually try to ask for a cash discount in between. Last time I bought a motorcycle and the shop wouldn’t budge. They offered a cash price, and the same price for paying in 6 installments at 0%. I know the CC company charges them 8% for that service, so I asked for a 5% discount, they said no, and I opted for the 6 installments. It is built in their costs so it wouldn’t make me choose another card to help the shop earn more.

  10. Sometimes I wonder if using one card over another makes much of a difference. When I’m buying from smaller/local businesses, I’ll lean towards cash (unless I don’t have cash on hand). I know that AmEx has a lot of benefits, so I understand the extra cost. But it is weird that they promote things like Small Business Weekend…do they waive fees for small businesses, or at least for the small businesses on that weekend?

  11. I know Amex charges more than other credit card companies. It’s a reason why a lot of small businesses don’t take Amex cards.

  12. I do use an Amex… because they give me more cash back than other places! :/

  13. That’s a pretty crazy amount. I guess all the cash back benefits the buyers get from using the card is coming out of the merchant’s pockets (0_0) I don’t have Amex but it can be an inconvenience sometimes when large companies like Costco only accepts Amex credit cards and not Visa or Mastercard, lame :0(

  14. Honestly, I think businesses price in this increase, so I don’t really see it as businesses losing money. They are aware of the chunk that is being taken out by the credit card companies and price accordingly. I’m sure they would be very happy if you used cash instead, though :)

  15. I feel bad about using my credit card vs my debit card at my local grocery store. I get the 1% back from the credit card rewards, but I’m sure my grocery store would rather I avoid the huge service fee for them…

  16. Same in the UK. Visa and Mastercard both charge slightly less than 2% and Amex double. There’s little point having an AMEX card in the UK as virtually no businesses accept it, including some of the big ones.

    It is interesting to note though – even if you pay off your balance every month, the card company still makes a lot of money, just not at your own expense, which is why it’s still worth asking a credit card company to waive your annual fee each year. When I worked for Barclaycard, we always did this unless the card just wasn’t being used.

  17. I used to feel a bit guilty using the SmartCash, until I saw a report that said it had the same amount of charge to the retailer as the rest of the cards tend to.
    Another point about AMEX is that their terms for retailers are poor. These numbers might be wrong, but most credit card companies remit payment to the retailer in 30 days (I think) and Amex is 60. In your example above, that means the restaurant would have to wait two full months to get the $4600. It’s an example of why cash flow management is so ridiculously important for small businesses (all businesses, really).

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