If you have an American Express credit card with you, you probably already know the drill. When you’re done shopping and ready to make a purchase, head to the checkout of any store. But instead of swiping your favorite AmEx card, you glimpse the one sign you didn’t want to see: “American Express is not accepted.”
This is an unfortunate scenario, and it’s one that plays out over and over again. Due to American Express’s high trading fees, many retailers are unable or unwilling to accept American Express as payment. Keep reading to learn more about how American Express works and how to avoid disappointment at the checkout.
What’s the deal with American Express merchant fees?
Before we talk about alternative payment options, let’s talk about why many retailers don’t use Amex in the first place. As with anything else, you just need to follow the money to understand this phenomenon.
While most other card issuers charge merchants 1.5% to 2% transaction fees on each account in exchange for accepting credit cards as payment, American Express merchant fees are more than 2.5% to 3%. While that may not sound like a huge difference, it is true. A store that survives wafer-thin price hikes can’t afford to lose an extra percent of its profit margin, while a large retailer who makes hundreds of thousands of dollars every day or every week could lose a huge amount if they routinely pay Amex seller fees.
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Many retailers have chosen not to accept American Express entirely with that in mind. They assume that most consumers have another payment method that they can use anyway – and most of the time they are right.
At this point, you’re probably wondering how and why American Express charges higher transaction fees. It all comes down to their business model, how they make a profit and the type of customer they serve.
Many credit card issuers earn most of their profits when consumers pay interest on their balance. However, American Express links its revenue to the annual fees their customers pay, along with the takeout fees paid by retailers. In addition, American Express offers a wide range of charge cards that do not even allow consumers to take balance with them from month to month. With payment cards, swipe fees and annual fees are the only viable way for card issuers to make a profit.
Should you take an American Express credit card?
While not all retailers and merchants accept American Express, there’s a reason they remain so popular with consumers. You can still benefit from having the correct Amex card in your wallet.
For example, with American Express’s Blue Cash Preferred® Card, you can earn 6% back each year on your first $6,000 in U.S. grocery purchases, and 1% after that. This card charges an annual fee of $95 (not counting the first year), but you can quickly make up for that with such a high return on your shopping. In addition, this card comes with a welcome bonus.
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And if you don’t want to pay an annual fee (see Rates & Rates), you can always request the Blue Cash Everyday® Card from American Express instead. This will get you away from the annual fee, but you’ll still get 3% back on your first $6,000 in US grocery spending per year, along with 2% back at US gas stations and select US department stores, and 1% back on everything else.
In addition to these cards, American Express offers a range of premium credit cards for travel and rewards cards for business and personal use. But it’s still wise to have a backup plan if you’re stuck at the checkout.
[This article was first published on The Simple Dollar in 2020. It was updated in March, 2022.]