I'm kinda hoping this means American Express will have to fall into line with the other providers on pricing. I'm tempted to enable an AmEx penalty, since it costs more to process AmEx than Visa and Mastercard...that'd probably mean many customers would choose another card, even though it's probably our most popular payment choice right now (I'm pretty sure small business owners have AmEx cards at a higher rate than the average consumer, though I'm not entirely sure why).
> I'm pretty sure small business owners have AmEx cards at a higher rate than the average consumer, though I'm not entirely sure why
Because they treat business customers like royalty and offer great benefits. Nobody else offered me cards with:
* Unlimited credit
* Trade terms on all purchases (1.5% cash discount for paying a bill early, or pay 10% and have 60 days to pay interest-free)
* 90 days to return any purchase, even if the store won't take it back
* OPEN network discounts (office supplies, hotels, cars, etc)
* An actual human being that you talk to the same day your FedEx'd card arrives, who wants to know about your business and how AmEx can help you save money and manage cash flow
I'll echo what Dan said for their consumer accounts as well. I always get excellent, fast, friendly, competent, empowered customer service any time at all I have the slightest problem with a transaction on my American Express cards. So, I use them for everything.
I imagine their higher discount rate helps fund that customer service center, but if I saw a place charging more for Amex cards, I wouldn't shop there; I'd just go somewhere else. Amex customers are (at least, statistically,) more affluent and have a higher propensity to spend; you pay more for being able to access those people.
You have to think of credit card fees as part of your customer acquisition cost. You should be willing to pay more if the customer is worth more to you. People and businesses with Amex cards are more affluent than average, so you are willing to pay Amex more to acquire them than you'd pay Visa or MasterCard. That's why Amex can and does charge you more, not because they're simply passing through costs. If that was the case, more businesses would choose not to accept Amex; many of those where customer acquisition isn't an issue already don't (like utilities).
Amex has more affluent customers, on average, because they don't give cards to people with poor credit, and most of their cards have a significant annual fee. Their customers are those who can afford to pay extra for more benefits, which happens to correlate highly with overall affluence.
I have a Platinum American Express. I pay $495/year for my card, plus $175/year for three additional cards on the same account. I spend anywhere between $350K-$500K/year on the card (both personal and business-reimbursed expenses).
Are my charges more expensive for you as a business to process? Probably. I'm also more likely to spend a lot more with you than your average customer.
Honestly? I probably wouldn't. I'm in the minority though. Think how many Green charge card, OPEN card, regular consumer Amex credit card, and corporate card customers withe Amex there are out there. Would they quibble over an additional 1%? Or would they shop elsewhere with someone who absorbs the cost?
But at least merchants will have the choice now. In markets where you're operating on a 3% margin whether they're using amex or not can make or break the deal. Giving the consumer the option to pay a little extra or choose another payment method seems like a better solution than simply blocking amex altogether
"it seems a little backwards that the merchant is paying the cash processing fee" as every bank charges them. And every trip to the bank with the cash, or every armored card run to take it in.
I hate how people act like cash is costless. Cash is annoying, dirty, dangerous, and expensive. Perhaps not as much as credit cards, but places don't really honestly do the math much of the time.
That's pretty much how it played out in Australia where merchants have been allowed to on-charge credit card fees for several years. Most small businesses charge no additional fees for Visa or Mastercard but many will either not accept Amex or apply ~2% surcharge.
I'm kinda hoping this means American Express will have to fall into line with the other providers on pricing. I'm tempted to enable an AmEx penalty, since it costs more to process AmEx than Visa and Mastercard...that'd probably mean many customers would choose another card, even though it's probably our most popular payment choice right now (I'm pretty sure small business owners have AmEx cards at a higher rate than the average consumer, though I'm not entirely sure why).