The Complete Guide To American Express Interchange Rates & Merchant Fees
Despite what Visa and Mastercard’s advertising would have you believe, most businesses today do, in fact, accept American Express cards. However, for merchants looking to add Amex to their repertoire of payment options, the company has been a challenge. Higher processing rates and the need for separate contractual provisions have deterred many small business owners from bothering with a card brand that only accounts for a small (but still significant) portion of the market share.
An American Express card is notably different from other payment cards used by consumers. For one thing, this card is not really a credit card. Instead, it’s a “charge card,” meaning that purchases made with the card must be paid for within a defined grace period. Consumers can’t accumulate an unpaid balance month after month, and they also don’t pay the extortionate interest rates charged by other credit cards. Also, Amex operates on a closed network system, where American Express functions as both the credit card association and the issuing bank. This is unlike the open network system used by other popular credit card brands, where any bank that signs an agreement with the credit card association (such as Visa or Mastercard) can issue a card using that brand name.
Because of this closed network structure, Amex has a lot more control over how much it charges merchants to process transactions made with American Express cards. In fact, it’s free to set its rates as high as the market will allow — something which it’s never shied away from doing. At the same time, the company’s closed network isn’t a monopoly, and it still has to make arrangements with the large, direct processors in the industry (e.g., Fiserv (formerly First Data), Worldpay, Global Payments, etc.). These arrangements keep processing rates more or less under control, although they’re still generally higher than what you’ll pay to process a transaction from Visa or Mastercard.
Additionally, processing rate structures are different than other networks because the card type has no bearing on the processing rate. With Visa and Mastercard, rewards or commercial cards cost more to process than ordinary debit or credit cards. Not so with Amex. However, industries and merchant categories play a substantial role, and the popularity of the Amex brand in some of those pricier industries also leads to higher fees for merchants.
In this article, we’ll take a closer look at American Express’ fees and processing rates so that you understand precisely what accepting an Amex card will cost you and how you can go about adding Amex processing to your merchant account.
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How Much Does American Express Charge Per Transaction?
Accepting American Express has typically been a large hurdle for merchants because of how expensive it was. These days, the company has made it quite a bit easier, especially for small businesses. And it makes sense: American Express makes up a significant portion of transaction value in certain industries, especially travel, entertainment, and restaurants. If your business operates in these fields, you should definitely consider accepting Amex cards if you don’t already.
There are two main ways for you to start accepting American Express cards. The first is through the OptBlue program; the second option is through a direct agreement with American Express.
- OptBlue: OptBlue is a program where processors can offer Amex acceptance through their merchant services providers. Basically, Amex offers acquirers wholesale rates. Processors tack on their own markup, the same way they do with Visa and Mastercard, and then provide Amex acceptance as part of their suite of services. This ultimately translates to lower rates for merchants and, in theory, helps create competition. It also means there’s no standardization in rates, so some might charge a good deal more than others.
American Express processing rates shouldn’t be the sole determining factor in choosing a processor. You should look at overall rates (an interchange-plus plan is much better than a tiered pricing plan), any value-added services, and the quality of customer support.
- Direct Agreement: For small merchants, OptBlue is the best means of processing Amex cards. However, once you clear $1 million per year in American Express transactions, you must sign a separate, direct merchant agreement with American Express, not your processor. You’ll find this wording even in the contracts of providers such as Square. Amex gets away with this because it’s a closed network. It has total control, and if you don’t want to sign, no Amex cards for you.
A direct agreement is functionally a secondary, exclusive merchant account. The main difference is that you’ll stop paying your processor’s rates and have to pay Amex’s standard rates instead. They can be much higher than what you were previously paying through your processor. However, most processors can tack your American Express agreement onto their own and allow you to use the same software and hardware to process all of your transactions.
How Much Are American Express Interchange Rates?
Before we dive into the specifics of processing American Express cards, it’s good to understand some basics about payment processing. If you’re not familiar at all, I suggest taking a few minutes and looking over these helpful payment-related guides:
- The Complete Guide To Merchant Account & Credit Card Processing Fees
- How Much Should You Pay For Credit Card Processing?
- The Beginner’s Guide to Payment Processing (ebook download)
These resources will cover all the terminology you need to know as well as the difference between types of plans and the factors that have the biggest effect on your processing rates. One important difference to note with American Express processing is that Amex uses the term “discount fees” to refer to interchange fees. These fees are functionally identical to the interchange fees charged by other major credit card associations, such as Visa and Mastercard. Don’t be fooled by the processing industry doublespeak into thinking that you’re somehow getting a special deal on processing costs — you aren’t.
Amex Interchange Rates With OptBlue Agreements
With the OptBlue program, American Express provides standard “wholesale” (interchange) rates to processors, similar to Visa or Mastercard. Rates vary by category and ticket size, usually falling into one of three tiers. Then, the processors go in and add their own additional costs. Some, such as Helcim, offer interchange-plus (which it calls cost-plus) plans, which means there’s a clear, predictable markup. (Helcim’s Amex markup is 0.48% for retail merchants and 0.66% for virtual terminal merchants. Note that its markup for other card brands is lower than this.) On a tiered plan with another provider, you’ll see more variance in rates for qualified, mid-qualified, or non-qualified transactions.
Below are some of Helcim’s published processing rates for various types of Amex transactions, taken from the company’s OptBlue pricing page on its website. We’re using Helcim as an example because it’s one of the most transparent providers in the industry and fully discloses its Amex OptBlue pricing. Helcim’s pricing transparency allows you to get a good idea of what your processing costs will be like before you sign up with the company or even talk to the sales team. Don’t expect this kind of transparency from other providers! While full disclosure of processing rates is becoming more common, most traditional providers continue to rely on a quote-based system that doesn’t allow you to see the rates you’ll be paying until you’re much further along in the sales process.
Here are some of Helcim’s Amex processing rates for the most common types of transactions:
- Tickets Under $75: 1.60% + $0.10 per transaction
- Tickets $75.00-$1,000: 1.95% + $0.10 per transaction
- Tickets Above $1,000: 2.40% + $0.10 per transaction
- Tickets Under $5: 1.60% + $0.04 per transaction
- Tickets $5.00-$25: 1.85% + $0.10 per transaction
- Tickets $25.01-$150: 2.50% + $0.10 per transaction
- Tickets Above $150.00: 2.85% + $0.10 per transaction
- Tickets Under $15: 1.60% + $0.04 per transaction
- Tickets $15-$400: 1.70% + $0.10 per transaction
- Tickets $400.01-$3,000: 2.00% + $0.10 per transaction
- Tickets Above $3,000: 2.40% + $0.10 per transaction
Travel & Entertainment
- Tickets Under $100: 2.25% + $0.10 per transaction
- Tickets $100-$1,000: 2.60% + $0.10 per transaction
- Tickets Above $1,000: 3.00% + $0.10 per transaction
Note that the wholesale rates and processor markup aren’t the only costs you need to worry about. There are a few additional fees you’ll need to consider:
- Amex Network Fee (0.15%): This fee is owed on all Amex transactions, much like the network fees charged by Visa and Mastercard.
- Amex Cross-Border Fee (0.40%): This additional fee only applies to international transactions.
- Amex Keyed Fee (0.30%): This additional fee only applies to keyed-in or manually-entered transactions.
Any other fees you pay beyond this will be standard fees for your account and not directly related to your Amex acceptance.
Amex Interchange Rates With A Direct Agreement
As we mentioned above, a direct agreement with American Express is essentially just opening another merchant account, this one through Amex itself. The company offers two different pricing schemes:
- Discount Rate Plan: The overall structure of the discount rate plan is identical to the OptBlue program. You swipe or dip a card and then you’re charged a percentage of the transaction. That percentage varies by the transaction size and industry.
- Flat-Fee Plan: The alternative to the discount rate plan is the flat-fee plan. With this plan, you’ll pay $7.95 plus a flat monthly fee (which could be substantial) for your processing. The catch is that you must stay within specified terms — which means you need to have a very stable volume of processing from one month to the next or risk incurring additional fees.
American Express doesn’t publish a lot of details about its payment plans, not even its discount rates or how the flat-fee plan is calculated. I assume it’s an average amount based on your processing history. However, if you look on the American Express merchant page, you can enter an industry or profession and get an estimate of typical rates within a range. For lodging, as an example, the rate would fall between 3.2% and 3.5%. For a full-service restaurant, rates range between 2.9% and 3.5%. For a sewing/fabric shop, rates range between 2.89% and 3.2%.
With either pricing model, you won’t need to get secondary hardware or additional software. It’s fairly simple to get your Amex merchant number and give it to your merchant account provider. They will link the account so that you can process Amex cards using your existing system.
Of course, you’ll also still have to pay a host of additional fees, just like you would with the OptBlue pricing program. In addition to the fees described above, you might also be on the hook for the following fees disclosed in the American Express Merchant Reference Guide:
- Gateway Fee: This is also sometimes referred to as the “authorization fee.” In essence, it’s the amount your merchant account charges to process Amex cards along with the rest of your transactions. There’s no standardization, but these fees are often negotiable. Make sure that you ask about them when signing any agreement.
- Voice Authorization Fee (0.65%): This fee is assessed whenever the merchant’s POS system is unable to reach the Amex authorization, and the merchant chooses to call an authorization in over the phone.
Note that there are several other fees disclosed in the Reference Guide that can apply to your transactions under certain circumstances. Account maintenance fees are also disclosed, and they’re very similar to what you would pay with a traditional merchant account provider. We suggest that you review the latest version of this document before you sign up for either OptBlue or a direct agreement with Amex.
How Do Square & Other Payment Service Providers (PSPs) Accept American Express?
Square, PayPal, SumUp, and Stripe are all common examples of payment service providers (PSPs). These types of processors offer low-cost, pay-as-you-go processing services to small businesses that might otherwise not be able to afford a traditional merchant account. Individual user accounts are aggregated into one large merchant account, and flat-rate pricing is used to keep overall processing costs predictable.
However, PSPs still have to pay the same wholesale rates to Amex whenever a transaction using one of the company’s cards is processed that you would pay with OptBlue or a direct processing agreement. If you’ve compared the numbers, you might notice that some of the rates charged by American Express are higher than what most PSPs charge for the same transaction. So are PSPs able to negotiate special, lower rates directly with American Express? Not really. For the most part, they simply choose to accept a small loss on some transactions. They know that the uptick in business from accepting American Express will more than make up for the loss on certain transactions.
Are There Any Other American Express Merchant Fees?
Merchant account fees are a significant source of unhappiness for many business owners. Providers, issuing banks, and the credit card associations have all found multiple ways to tack on extra charges on top of the basic cost of processing transactions and maintaining a merchant account. While regular monthly fees, such as account fees or gateway fees, are a known and predictable expense, the bewildering variety of less-common incidental fees can sometimes add significant additional expense to the cost of processing credit cards. American Express is no exception, and its schedule of fees is very similar to what you’ll find with merchant account providers handling Visa and Mastercard transactions.
While we’ve discussed some of the major incidental fees the company charges above, there are even more that you should be aware of before you add Amex processing to your merchant account. The company’s American Express Merchant Reference Guide is your best official source of information on fees, and you can download the latest version from the American Express website. Chapter 12 of this guide details no less than 16 different types of fees that you may have to pay. Some of them, such as the “discount fee” (called an interchange fee by other card brands), will apply to all transactions. Other fees, such as voice authorization fees, only apply in specific situations.
A word of warning: Some of these fees can be extremely expensive. For example, Amex reserves the right to impose what it calls a “data pass violation fee” on merchants who attempt to process a transaction using card data that wasn’t obtained directly from the cardholder. While this type of action is probably illegal, and the fee is most likely intended to deter fraud, it’s also something that you don’t ever want to have to pay. Data pass violation fees range from as low as $2,500 to as high as $50,000 (!), depending on your annual processing volume. Fortunately, the company will give you ample warning and an opportunity to correct the deviation before actually charging you this fee.
For more information on card brand fees in general, see our article, The Complete Guide To Card Brand Fees For Merchant Accounts.
How Much Do Merchants Need To Worry About American Express Processing Fees?
As we’ve discussed above, American Express differs from Visa, Mastercard, and other major credit card brands by operating in a closed system, where the company controls both consumer card issuance and merchant acceptance. Given how much clout the card brand wields in industries such as restaurants, tourism, and luxury retail goods, it’s not surprising that Amex processing is more expensive overall than other card brands.
Unfortunately, there’s no one clear, transparent rate for Amex transactions. There isn’t even standardized pricing by industry. Your monthly processing volume, the ticket size, and whether the transaction is card-present or card-not-present all play a role.
The OptBlue program makes it easier for merchants to start accepting Amex without having to jump through additional hoops. However, it’s up to you to make sure that the rates you’re paying are competitive and that you’re getting solid customer support from your existing merchant account provider.
Once you hit a high enough processing volume, you’ll have no choice but to go through American Express directly for the account. You have a couple of plans to choose from, so you’ll want to compare the numbers and see which is ultimately the better value.
If you’re ready to add American Express acceptance to your card processing setup, we recommend checking out our top-rated processors, all of which offer the OptBlue plan. Don’t forget our credit card processing resources, either! And if you have questions, you can always leave a comment.