If you are in the habit of leaving your American Express credit cards in the wallet while shopping, you would now find out more reasons to put back the card into use.
Given the latest initiative by the leading credit card service provider for increasing American Express acceptance rates amongst the merchants across the United States of America, American Express reveals that it has achieved a sort of virtual parity with other providers like MasterCard & Visa.
In January 2020, American Express made the announcement about the same during its earnings release of Q4 2019.
What would it imply for you? As per the study reports, 99 per cent of merchants or businesses in the United States of America accepting credit cards can now accept AmEx.
Why was American Express Lagging?
American Express serves to be one of the major payment networks in the United States of America –along with Discover, Visa, and MasterCard. For several years, American Express (AmEx) had been lagging behind its competitors as far as merchant acceptance was concerned.
The main reason for the same was that in comparison to other payment networks, AmEx aimed at charging merchants higher rates of interchange fees –also referred to as swipe fees.
When you tend to swipe the credit card, the store is known to pay a specific fee amount for ensuring that you are charged while the store receives the payment for the sale. Part of the given fee –referred to as “interchange,” is known to head to the issuer of the credit card.
It is known to typically range between 1 & 3 per cent of the given transaction. This is known to vary on several factors –including merchant type, value, transactional volume, and card type.
In comparison to the interchange fees for debit cards, being capped, the federal law is not regulating or limiting the swipe fees for the credit cards.
These are usually specified by the respective payment networks. In the past, American Express was more expensive for acceptance by the merchants. The swipe fees were as high as one percentage –higher than other competitors.
While this might not appear much, it can still look forward to making a big difference for small businesses that tend to operate on very thin margins.
How has American Express caught the Attention of Businesses?
American Express reveals that a major factor in its overall increased acceptance in the series of past few years has been the revolutionary OptBlue Program.
The given program is known to allow small business owners (defined as those who tend to have an estimated charge volume for AmEx to be less than $1 million annually) to accept cards of AmEx through one of the major third-party payment processors partnering with the issuer.
In its shift from the conventional systems, the payment processors are known to fix the swipe fee rates that they charge out of businesses.
This allows the merchants to shop around for highly competitive rates. It is indeed making a difference. As per a recent study report, it has been estimated that third-party partnerships have helped in boosting the overall AmEx acceptance.
Moreover, the study report also revealed that the average merchant fee for AmEx credit cards had been minimized to 2.3 per cent in the year 2018 –in comparison to 2.15 per cent for Discover and 2.26 per cent of MasterCard & Visa.
The lower fees are not hurting the bottom line of AmEx either. The issuer had reported the all-time high values of revenue in the year 2018.
The same has been driven by several factors –including the total growth in the number of cardholders, growth in evolving balances, growth in the overall spending in cards across the globe, and the overall acceptance in the United States and other parts of the world.
Merchants are receiving another incentive for accepting American Express. The respective cardholders are known to spend more. On average, the consumers who possess AmEx cards are known to spend 3 times in comparison to those not having the cards.
Moreover, the average transactions on such AmEx cards tend to be 1.7 times higher.
Where is American Express Still Lagging?
While the overall acceptance gap for American Express cards might have virtually narrowed down in the United States, it is still not uncommon to experience acceptance gaps from the merchants in other parts of the world.
Acceptance of data internationally has not been made available immediately. However, the overall gap with MasterCard and Visa tends to be significant enough that American Express has ensured its closing as the topmost priority.
The issuer aims at working towards increasing the overall acceptance across the world by around 20 per cent in a span of 3 years. It aims to achieve the same by partnering with local banks across the globe for acquiring merchants on the behalf of American Express.
It is also important to note that American Express has taken major steps over the span of last year for improving the overall scope of the reward-earning credit cards –most of which are utilized for earning dining rewards at restaurants across the United States of America only.
Some of the cards –the dining rewards of which have been extended to restaurants in different parts of the world as well are:
- The American Express Gold Card earning 4 points on every $1 spent at restaurants all around the world.
- The American Express Green Card earning 3 points on every $1 spent at restaurants across the world.
- The Delta SkyMiles Blue American Express Card earning 2 points on every $1 spent for restaurants across the globe.
Indeed, the given offers assume that the restaurant in question should be accepting American Express cards in the first place.
If you are used to making transactions using American Express, then you should also consider using Visa or MasterCard as the backup cards in case you are travelling internationally.