Is Payment Processing of American Express Expensive for Merchants?

MasterCard, Visa, Discover, and American Express are the four major payment network brands in the United States. Out of these four, American Express by far charges the highest rates for credit/debit card transactions.

Due to these high charges, many retailers refrain from accepting AmEx cards at their business. However, this also significantly lowers their business sales because a considerable amount of consumers use AmEx cards in the US.

Over the past few decades, merchant service providers have forced American Express to decrease its processing rates. Eventually, AmEx was forced to reduce their fees but still, it is substantially higher as compared to other payment network companies.

In this article, let’s find out how expensive is American Express and what is their fee structure for merchants.

What is the Fee Structure of American Express for Merchants?

Merchants that have opted for AmEx credit card processing get a per transaction discount fee. However, this discount fee is not offered if the merchant has taken a monthly flat-rate plan. Also, the per-transaction fee includes other assessments and additional charges.

These charges are for taking special services or non-compliance of the business with AmEx policies. The fees that American Express charges are duly stated in the processing agreement with the merchant. Here’s a list of fees charged by American Express:

Discount Fees for Card Acceptance

American Express offers two types of pricing plans – Flat rate and Discount Rate.

  1. Discount Rate: American Express charges a discount rate per transaction. This amount varies from industry to industry. Here are the charges are shown based on various industries:
  • B2B –2.89%
  • Restaurants –3.50%
  • Education – 2.50%
  • Lodging – 3.50%
  • Independent Gas Station –3.25%
  • Internet & Mail Order –3.50%
  • Other Transportation – 3.50%
  • Healthcare based in Office –2.55%
  • Retail – 2.89%
  • Wholesale, Services, and Others –2.89%
  • Telecommunications – 3.50%
  • Supermarkets – 2.30%

Additionally, an inbound fee is also required to be paid by cardholders who got their card from the issuing companies located outside the US.

The inbound fee is to be paid by all the industries that feature in the above list. However, some exceptions are there.

These include –Elementary schools, secondary schools, universities, colleges, professional schools, recreation camps, and child care services.

  1. Monthly Fee: The monthly flat fee charged by American Express per month is $7.95. If a merchant opts for the monthly fee of American Express, they won’t get the discount rate. A monthly flat rate is a specially designed option for smaller merchants.
    Small businesses having less than $4,999 of transaction volume per year are eligible for a monthly fee. If the annual transaction volume exceeds $4,999, the standard discount rate will be applied to the payment transactions. Regardless of what the transaction volume is, these industries have to opt for a monthly flat fee:
  • Mail Order
  • Internet Delivery Merchants
  • Telephone Order
  • Businesses based in Homes

Authorization Fees

  1. Non-Swiping Transaction Fee: American Express charges 0.30% of the amount of transaction. This fee is taken when a transaction is completed without reading the magnetic stripe credit card or swiping the credit card.
  2. Gateway Fees: This fee varies from transaction to transaction. Typically, it starts from $0.001 and so on. If the route of the authorization request is through MasterCard or Visa processing gateways, American Express passes this fee to the associated merchant.
  3. Voice Authorization Request Fee: American Express charges around $0.65per voice authorization request. Sometimes, due to internal error, the merchant’s POS system is not able to connect to the AmEx authorization system. In this case, the merchant can call American Express and get the voice authorization.

Settlement and Submission Fees

  1. Paper Statements Fee: American Express charges a $7.95 statement fee per statement. It is only charged when the merchant chooses to accept paper statements. They do not opt for electronic statements.
  2. Check Fee: American Express charges $1.50 per cheque. It applies to all the cheques created or issued by AmEx.
  3. Inbound Fee: AmEx charges a total of 0.40% inbound fee per transaction amount. It applies to the transactions made through cards that were issued by AmEx situated outside the United States.
  4. Monthly Gross Fee: AmEx charges a total of 0.03% per transaction amount. It applies to merchants who have enrolled themselves in a monthly gross pay program.
  5. Non-Compliance Transaction Fee: American Express charges a total of $0.10 – $1.00 for each transaction. It applies to the charges that are non-compliant with American Express policies.

Data Security Fee

  1. Non-Validation Fees for Data Security: The range of this fee is from $5,000 to $45,000. The merchant is required to provide valid documents for Data Security Fees. All these documents must be compliant with the Data Security Policies of American Express.
  2. Data Incident Fee: This fee doesn’t exceed $100,000 for each data incident. It is assessed concerning the data security incidents.

Data Passing Violation Fee

It ranges from $2,500 to $50,000. This fee is charged by American Express when the transaction data is violated.

Excessive Dispute Charges

If the merchant has opted for the Immediate Chargeback Program, then they are required to pay only $5 in case of a disputed transaction. This goes up to $15 if the merchant hasn’t opted for this program.

Merchant Regulation Fee

Opting for American Express Merchant Regulation costs around $22.50 for a hard copy and $8.00 for a digital copy.

Final Thoughts

Yes, the American Express payment cards are more expensive as compared to other credit card companies. However, switching to American Express payment processing is also not a bad option. After all, merchants don’t have to pay any monthly fees.

Also, there are many perks and benefits if your business processes American Express cards. The number of consumers that use American Express credit cards is considerably high. Therefore, it might not be a bad idea to process AmEx credit cards.

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