American Express is one of the most popular cards to get in the US. But unlike most credit cards, it’s not everywhere that you can use the Amex card. So, why is the American Express card not accepted everywhere?
The high interchange fee is why AMEX isn’t accepted everywhere. But this fee isn’t surprising given that AMEX doesn’t make much from interest. You can still use the card at any major retailer and online platform, plus several other places. Benefits to using AMEX cards include points and rewards.
If you’re planning to get an AMEX card, it’s important to consider some factors such as credit score, purpose, annual fees, and rewards. Here, we discuss why some merchants don’t accept American Express and other things you should know about having an American Express card.
What is American Express
American Express is a payment company that issues several types of charge and credit cards, among other products. It has about 112 million cards in circulation as of 2020, making it one of the biggest card issuers globally. In the US, it had 53.8 million cards in 2020, making it part of the top 5 card issuers in the country. However, it’s not the most accepted card compared with the Visa or MasterCard.
Why don’t Merchants Accept American Express?
If you use an American Express card, you would have experienced merchants who tell you they accept other cards but not AMEX. This is because of the high interchange fees that AMEX charges on its cards. Compared to other payment networks such as MasterCard and Visa, the percentage of each transaction that AMEX collect is a bit higher. This has discouraged many merchants from accepting AMEX cards as they’re also seeking to keep as much of the profits as possible.
Payment networks such as MasterCard and Visa charge between 1.5% and 2.5%. But it’s a lot different for AMEX, which charges between 2.5% to 3.5% of all transactions. The numbers may fluctuate, but it’s high enough to be a challenge for small retailers. At times, the extra 1 – 2% is the retailer’s profit. Due to these fees, even major retailers could lose millions annually when customers constantly pay with Amex cards. When deciding whether or not to accept Amex cards, most businesses consider factors such as business size, markups, number of transactions, etc.
Why is American Express more Expensive?
AMEX is a major credit card issuer that earns revenue mostly on interchange fees and interest charges. Most cards that American Express issues are charge cards. These cards require the cardholder to pay the entire statement balance monthly, which means that Amex doesn’t receive any interest on the products. Thus, it has to resort to extra charges collected on each transaction you pay for. Most of these cards also come with competitive rewards to get more people to use the card. Since these rewards mean higher issuing costs and its major revenue comes from interchange fees, it has no choice but to charge the merchant higher. Visa and Mastercard make most of their revenue from the interest rate, but American Express just charges high annual fees, which are still quite affordable for most customers.
Where can you use American Express Cards?
American Express cards are accepted at major sale outlets such as gas stations, superstores, department stores, and national brands. Mobile payment platforms such as PayPal, Venmo, Blocks, and popular sharing programs also accept it. The ones that may not accept it are independent businesses and small retailers. But you won’t have any problem using it at any major retailer in the US.
Since it’s not accepted everywhere, it’s advisable for all American Express cardholders to always have a backup card with a different payment network that you can use when you have to pay with your card with a merchant that doesn’t accept American Express. Even if you’re not using American Express, having backup credit cards is always advisable. Your primary credit card could get lost, stolen, damaged, or fail to work for any reason. A backup card can come to your aid, in this case, ensuring that you’re not stranded or anything. However, it’s also important to manage your credit cards responsibly, as this will help you improve your credit score and build up positive credit history.
Why use Amex Card
Despite the fact it’s not accepted everywhere, American Express cards are still quite popular. The reason for this is simple. They offer several rewards. Holders earn points for using the card and can use these points to get great rewards such as hotel stays and free flights. Of course, your spending habit will determine how much reward you get at the end of the year. Your spending habits also influence your annual fees. However, it’s important to always use your credit card wisely and not incur any cost you can’t afford.
As for merchants, accepting Amex cards can benefit the business in some cases. Generally, AmEx cardholders are known to be big spenders due to the rewards and incentives that come from using the card, so most of them will spend more money on a business than other cardholders. Even Amex processing fees have reduced slightly over the years as the company tries to achieve the goal of equal card acceptance with Mastercard and Visa.
How to pick the right AMEX Card
Choosing the right credit card for you can be tricky even after settling on the fact that you want an Amex card. It offers different types of cards such as Platinum card, Gold Card, etc. you can pick the right one by considering the following factors:
1. Credit Score
Your credit score will go a long way to determine which kind of card you get. The better your score, the more options of cards you’ll have. So, make sure your score is good and if not, work to improve it before applying for a card. You can check if you prequalify for a card with an issuer by using tools or websites like CardMatch.
2. Purpose Of the Card
American Express cards are best suited for different purposes. For example, the platinum card is best for those that regularly travel, while the gold card is for those foodies. The purpose can help you choose the best card.
3. Rewards and Points
You can tell whether a card is suitable for you by checking what you need to do to earn certain points and rewards. Also, consider the overall rewards programs to see whether it’s enticing for you.
4. Annual Fee
The annual fee on the card varies based on the type of card. Platinum has a $695 annual fee, while Gold has a $250 annual fee. That means Gold is cheaper to own, but you also need to consider this while weighing the value you’ll get from using the card too.
The high fees that American Express charges merchants for transactions stop many merchants in the US from accepting it. But that’s not enough reason not to use the card as AMEX cards usually offer many benefits.