American Express gets a bum rap when it comes to their treatment of small businesses. Ironically (or perhaps not so ironically, depending on your level of cynicism), American Express is a huge supporter of the Shop Small Movement and even founded the annual event Small Business Saturday. The reality falls somewhere in the middle. American Express has traditionally catered itself towards the more affluent clientele. Part of that equation is that they charge higher than industry standard merchant fees.
So what does that mean for your business? It means that each small business owner must decide whether the pain of higher fees is worth the potential benefits of accepting one of the largest credit card companies in the world. Here are some highlights to help you make an informed decision.
How American Express is Different from Other Credit Card Companies
Credit cards are a modern convenience that few of us can function without. Yet how many of us have accrued credit debt only to pay hundreds or thousands of dollars in late fees and/or credit card interest? Unfortunately, most credit card companies hope you don’t make all of your payments on time because that is how they make money.
American Express does things slightly differently. Rather than relying heavily on customers failing to make their payments, AmEx instead charges higher interchange rates, otherwise known as transactional fees. This is fantastic for AmEx cardholders, as they reap the benefits of top-notch service without footing the bill. It should be noted that American Express still charges late fees and interest for missed payments, but the difference remains.
Of course, that money needs to come from somewhere! And that somewhere is usually the merchant. Merchants pay higher rates when taking American Express to offset the savings that AmEx passes on to its clientele.
Small businesses also have to option of going with a program known as AmEx OptBlue. This program is specifically designed to allow smaller merchants to process American Express for lower rates and faster settlement periods.
The Potential Risks of Not Accepting American Express
There is no doubt that taking American Express can run up a business’ merchant account tab. The question then becomes: why do any small businesses take AmEx? The answer is quite simple: American Express is the fourth largest credit card company in the world. Not accepting American Express may not lose your business flat out, but it is likely to inconvenience and possibly even ire your consumers.
The risks of not accepting American Express are a matter of customer service. By not taking your consumer’s preferred method of payment, you are essentially telling them that you value a lower rate more than you value their convenience. While many customers will be understanding and accommodating, there is sure to be a percentage of people who are neither.
Should Your Business Accept American Express Payments?
American Express is a cardholder-first company. This does not mean that they are actively out to make the lives of small business owners miserable. The two primary complaints levied against accepting AmEx include their higher rates and their slower settlement times. The data does support these claims. It is estimated that American Express, on average, charges less than a full percentage point higher per transaction than its competition, so in reality, it’s not that much more.
Should your business accept American Express credit card payments? Probably. The rate difference sounds worse than it is in reality. Regardless, the best way to make this decision is to run some hypothetical numbers with the help of a merchant service representative to determine the true costs you can expect to incur.
Merchant Service Solutions for Different Business Types
It is easy for us to sit here and say that all businesses should take American Express. After all, the customer is always right…right? The fact remains that no two businesses are exactly alike. A high-end salon does not deal with the same problems as a high volume coffee shop. Where the former business model might be able to easily absorb higher transactional rates, a high volume, low margin business might be decimated by less optimal credit card processing fees.
This is a roundabout way of stating the obvious: only you and your business partners know for sure whether or not taking American Express will benefit your small business. When push comes to shove, being accommodating is always the preferred option. Working with a knowledgeable and experienced merchant service representative is a great way to understand the details of what American Express payments would look like for your individual business.
True Merchant Helps Businesses Take American Express
The merchant service professionals at True Merchant have extensive experience working with businesses of all sizes. We take pride in getting to know our clients so that we can fine-tune our services to meet their unique business goals. Whether you are looking to secure credit card transactions, utilize enterprise resource planning, or need to implement a surcharge program, we are here to help.
Our platform is well equipped to process payments from all major credit card companies including American Express. True Merchant is here to work with businesses of all sizes to determine what services and solutions will best suit your needs.
To learn more about how we can help your business grow, please call or email a member of our qualified merchant services team today!
