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Should my business accept AMEX credit cards? | Dispelling 3 myths

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Ryleigh Stangness | January 20, 2023

“why do so many businesses feel like they need to steer clear of accepting AMEX? You might be surprised to learn the truth behind these common myths.”
6 min read
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    We’ve all seen the handmade sharpie signs at the checkout counter or pasted in the storefront window...

    “Sorry, we do not accept American Express.”

    But is this widespread snubbing really warranted? In 2022 some businesses still hesitate to accept AMEX credit cards because of some lingering negative perceptions that have surrounded the steely Spartan brand. We are revisiting these notions to see if they still hold true today - you might be surprised to learn the answers and you may even save a bit of money.

    Misconceptions of using AMEX

    So why do so many businesses feel like they need to steer clear of accepting AMEX? We looked into why and here's what a lot of businesses are worried about:

    1. Business owners feel AMEX charges businesses high interchange rates to accept their cards

    2. There is a widespread sentiment that it's more difficult to process an AMEX transaction than a Visa or Mastercard transaction

    3. Merchants believe that AMEX transaction rates are generally higher than Visa and Mastercard

    Lucky for you, if you've ever had one or more of the concerns above,we are going to address each of them in this article.

    Myth 1: AMEX charges businesses high interchange rates

    Verdict: True (if you process over 1$M/ year)

    The scoop:

    While it may be true that AMEX can generally have higher rates associated with it, they also have varying rates and programs that may be available to you based on your transaction volume. Higher interchange rates are usually reserved for their larger client cards with higher processing rates and volumes, so there’s potentially some good news if you’re a small business.

    One of the reasons their interchange rates can be higher is because many AMEX cards are charge cards — NOT credit cards — meaning consumers are approved for a spending limit, but the balance has to be paid in full every month, rather than a line of credit which can roll over and incur interest charges. Consumers still have attractive rewards and cash-back options but there are no interest charges as there are with traditional credit cards. This means the cardholder is getting all of the benefits of a credit card, while businesses who accept these cards could be paying higher interchange fees to account for the rewards.

    However, when small and medium businesses (processing less than $1M in AMEX transactions/year) sign up for AMEX's OptBlue program, they can get access to competitive interchange rates that make it much more affordable to accept AMEX charge cards and credit cards.

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    Myth 2: It's more difficult to process an AMEX transaction than a Visa or Mastercard transaction

    Verdict: Myth (For small and medium businesses)

    The scoop:

    For U.S. businesses processing less than $1million, or $500,000 for Canadian businesses, AMEX transactions are just as simple as any other card brand when you process with AMEX’s OptBlue program- let us explain how.

    This myth was once true, since merchants used to have to get a Service Establishment (SE) number directly through AMEX to link their AMEX account through their payment processor (which businesses processing over $1M still do). Their payment processor would accept AMEX, Visa, and Mastercard payments through their credit card terminal to their payment processor but AMEX transactions would be redirected to AMEX’s network instead. Merchants would then receive a separate statement and deposit for these transactions, making it a bit messier to reconcile.

    However, with OptBlue, the payment processor manages the back-end so all your transactions are recorded on one statement, and deposited into one merchant account just like your other transactions from other card brands.

    Myth 3: AMEX transactions are more expensive than Visa and Mastercard

    Verdict: Myth

    The scoop:

    Just like any card brand, AMEX will have higher interchange rates on certain transactions and lower on others, so determining which card types and transaction types your business accepts, and having an understanding of those interchange types will help you to determine whether it is right for your business to accept this card brand.

    AMEX’s OptBlue program has specific wholesale rates that lets businesses take advantage of lower interchange rates through credit card processors who bill using Interchange Plus pricing. The interchange rate is determined exclusively by the card brands, and is affected by things like the type of card, the industry your business is in, and the level of risk associated with how the card is accepted (in-person versus online).

    Just like Visa and Mastercard, while some transactions might be higher in interchange rates, a good chunk of them can actually save you money if they are processed at the lower rates. Staying up to date with changes to the interchange rates every April and October can help you stay informed about ways to take advantage of new rates or changes to existing ones.

    Of course, to take advantage of the savings passed on from lower interchange rates, you must process payments through a payments company offering Interchange Plus pricing.

    When you process payments through a processor who offers this type of pricing model, rather than flat rate or subscription pricing for example, you pay the interchange rate plus a small margin instead of a flat rate. This way, when the interchange rate is lower than a flat fee (which is usually is), the processor passes on the savings directly to you.

    With interchange plus pricing and AMEX’s OptBlue rates, American Express is highly competitive with Visa and Mastercard for specific transaction types and cards. That is especially true when you consider the benefits discussed in the next section.

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    Benefits of using AMEX OptBlue

    With Mastercard and Visa dominating a huge portion of the market, many businesses wonder why they should bother accepting AMEX. There are some benefits to accepting more types of credit cards rather than less.

    Accepting credit cards can generally help increase sales and grow your business while adding an extra layer of security to protect both you and your customers' information. Many of these benefits outweigh the costs associated with accepting credit cards, which we've alluded to in our article on implementing surcharges (another way to make accepting credit cards more affordable!).

    With the negative perceptions surrounding AMEX specifically, many business owners have written it off entirely. While thinking they might be playing it safe, they might be missing out on some interesting benefits.

    According to AmericanExpress.com, "58% of American Express Card Members report that they prefer to make purchases where American Express cards are accepted."

    And while AMEX customers prefer to shop where they can use their cards, there are a few other reasons businesses may want to leverage the OptBlue as well:

    1. AMEX tends to offer high spending limits and rewards for consumers, which offers incentives and flexibility for your customers to bite the bullet on those larger purchases.

    2. Advanced fraud protection — AMEX has an impressive arsenal of tools and tech that enables them to be proactive in detecting and preventing fraudulent transactions.

    3. You can process OptBlue transactions the same way with your processor's Interchange Plus payment provider- giving you the ability to take advantage of some of their lower rates.

    Is AMEX a good fit for your business?

    If you haven’t taken a second look at AMEX in recent years, it might be time to reconsider which card brands you accept at your business. As we pointed out, there are some key benefits to merely offering flexibility for your customers. Moreover, it might be a way to cut some of your credit card processing fees. If you’re interested in learning more about how AMEX’s OptBlue program works for new or existing AMEX customers, read our next article.

    Now that we have dispelled some of the myths that might have deterred you from accepting American Express payments before, perhaps it’s time to retire that sign out front.

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