If you carry an American Express credit card, you probably already know the drill. Once you’re done shopping and ready to make a purchase, you approach the checkout counter at some random store. But instead of swiping your favorite AmEx card, you catch a peek of the one sign you didn’t want to see – “American Express not accepted.”
This is an unfortunate scenario, but it’s one that plays out time and time again. Due to high American Express merchant fees, many retailers cannot – or will not – accept American Express as payment. Keep reading to learn more about the way American Express operates, and how you can avoid a letdown at the register.
What’s the Deal with American Express Merchant Fees?
First things first. Before we talk about alternative payment options, let’s talk about why many retailers don’t take AmEx in the first place. As with anything else, all you have to do is follow the money to understand this phenomenon.
Where most other card issuers charge retailers a 2% to 3% transaction fee on each bill in exchange for accepting credit card as payment, American Express merchant fees are more like 3.5%. While that might not sound like a huge difference, it adds up. A store who survives on razor-thin markups can’t afford to lose an extra percent of profit margin, while a large retailer who does hundreds of thousands of dollars in sales every day or every week stands to lose a tremendous amount of money if they’re routinely paying AmEx merchant fees.
With that in mind, many retailers have chosen not to accept American Express altogether. They assume that most consumers have another form of payment they can use anyway — and, most of the time, they’re right.
At this point, you’re probably wondering how and why American Express charges a higher transaction fee. It all boils down to their business model, how they earn profits, and the type of customer they serve.
Where some credit card issuers earn most of their profits when consumers pay interest on their balances, American Express pegs its earnings on the annual fees their clients pay, along with swipe fees paid by retailers. In addition, American Express offers a wide range of charge cards that don’t even allow consumers to carry a balance from month to month. With charge cards, swipe fees and annual fees are the only feasible way for card issuers to turn a profit.
Should You Get an American Express Credit Card?
While not all retailers and merchants accept American Express, there’s a reason they remain so popular among consumers. While you might have to use an alternative form of payment every once in a while, you can still benefit heavily from having the right American Express card in your wallet.
With the Blue Cash Preferred® Card from American Express, for example, you can earn 6% back on your first $6,000 in U.S. supermarket purchases every year, then 1%. This card does charge an annual fee (See Rates & Fees), but you can make up for that in a hurry with such a high rate of return on your grocery spending. Plus, this card comes with a signup bonus to boot.
And if you don’t want to pay an annual fee (See Rates & Fees) , you can always sign up for the Blue Cash Everyday® Card from American Express instead. You’ll escape the annual fee with this one, but you’ll still get 3% back on your first $6,000 in U.S. supermarket spending every year, along with 2% back at U.S. gas stations and at select U.S. department stores, 1% back on everything else.
In addition to these cards, American Express offers an array of top-notch travel credit cards and rewards cards for business and personal use. If you’re interested in learning which cards offer the best benefits, check out our new guide on the best American Express cards currently on the market.
- Related: Best American Express Credit Cards
If you’re thinking of getting an American Express card, don’t let a few retailers that don’t accept the card stand in your way of their lucrative rewards. While a handful of merchants don’t want to pay the extra fees, the majority of businesses are more than happy to accept American Express if it means gaining your business.
To protect yourself from an awkward situation at the checkout, however, you should carry at least one other form of payment with you at all times. It can be another credit card from a different issuer, a debit card from your bank, or even cold, hard cash. As long as you have at least one way to pay that doesn’t involve an American Express card, just in case, you’ll be fine.
Have you ever had trouble using American Express before? Do you carry an American Express card? Please share your story below.
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