Why Most American Express Cards Charge Annual Fees?

[fltireguy]

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@K-in-Boston wrote:

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@BronzeTrader wrote:

But all AmEx cards charge higher rates from merchants. This is why a lot merchants do not accept AmEx cards.  

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This is not always the case.  There are two factors that really contribute to this perception, though.  First is the long-held "known fact" that AmEx fees are just higher.  Second is that prior to the AmEx OptBlue program (and its previous incarnation that was not widely used), merchants had to deal directly with AmEx in order to create merchant accounts and negotiate rates.  Depending on the type of business OptBlue codes your business, the rates could be quite in line with many Visa/MC rates and possibly less depending on the dollar amounts of the sales.  I manage the merchant accounts for a small chain of restaurants and am quite knowledgable in this area.  Because of our negotiated rates with AmEx, our catering division actually pays LESS for AmEx transactions than the majority of non-debit (debit card used as credit, not with a PIN) Visa and MasterCard transactions.  The fact that AmEx averages per sale are significantly higher than other card brands is reason enough for merchants to accept the card, even if the percentage may be slightly higher.  If you have customers that regularly spend 20-30% more, it's a no-brainer to make them happy and keep them coming back even if you may pay 0.5-1% more for the transaction.  And again, there are a lot of variables but there are indeed scenarios where AmEx can be cheaper to accept.

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+1

 I owned a convenience store and deli a few years back... Amex was by far my preferred card partner. Why? simple. awesome customer service. Fast payment. NO TRANSACTION FEES (saved me 15 cents per transaction - it might not seem like much, but with a $10 average tivcket, it was HUGE). And, they were 1/4% under my MC/ViSA discount rates

[BronzeTrader]

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@fltireguy wrote:

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+1

 I owned a convenience store and deli a few years back... Amex was by far my preferred card partner. Why? simple. awesome customer service. Fast payment. NO TRANSACTION FEES (saved me 15 cents per transaction - it might not seem like much, but with a $10 average tivcket, it was HUGE). And, they were 1/4% under my MC/ViSA discount rates

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This is interesting. My impression is that AmEx charges about 4%+ at small places (like restaurant). So I always feel gilty when I swipe my AmEx card at lunch place. I charge Visa instead. 

The same with Costco swapping from AmEx to Citi. Costco pays like ~1% fee. I was surprised to see the fee so low. I know Costco has a lot of bargagaining power since it is huge.

I guess there are more into the fees than we customers really know.

[fltireguy]

I was @ 1.59%, MC/Vsa were 1/72% plus 15 cent trans fee...

[BronzeTrader]

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@K-in-Boston wrote:

Yes, good point about revolvers being around for a while.  The AmEx Blue in my signature really is just a "Blue from American Express" - a 15 year-old $0 AF revolver.  I'm holding onto it more for AAoA and util padding; it gets almost zero use.

I never carry cash, and therefore will generally not shop at places that do not accept credit cards.  (Exception to this would be when traveling internationally, when I often grab cash from ATMs.)  Until about a year ago, I often wouldn't return to places that I knew didn't accept AmEx.  Now that I get rewards on par or better than MRs, I've become more flexible on this but I used to be the poster child for AmEx merchant acquisition.  LOL

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The waitress at Lugar Steakhouse in New York would not care how heavy our metal cards weight! There are plenty rich bankers there. 

[redpat]

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@BronzeTrader wrote:

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@K-in-Boston wrote:

Yes, good point about revolvers being around for a while.  The AmEx Blue in my signature really is just a "Blue from American Express" - a 15 year-old $0 AF revolver.  I'm holding onto it more for AAoA and util padding; it gets almost zero use.

I never carry cash, and therefore will generally not shop at places that do not accept credit cards.  (Exception to this would be when traveling internationally, when I often grab cash from ATMs.)  Until about a year ago, I often wouldn't return to places that I knew didn't accept AmEx.  Now that I get rewards on par or better than MRs, I've become more flexible on this but I used to be the poster child for AmEx merchant acquisition.  LOL

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The waitress at Lugar Steakhouse in New York would not care how heavy our metal cards weight! There are plenty rich bankers there. 

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One, there are no waitreses only waiters they are all male, second they only take cash and third, you can apply for their house credit card if you want to use plastic at peter lugars.

[Anonymous]

I never understood cash only places. I prefer my customers using their cards because they generally spend more!

[BronzeTrader]

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@Anonymous wrote:
I never understood cash only places. I prefer my customers using their cards because they generally spend more!

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Some of the small places, like laundry and Asian restaurant can ill afford to pay the 3-4% credit card fees. Ethinic background is another thing and I do not want to go to far in that direction. There are also other things for cash only.... Cash is the king!

[rlx01]

No one is paying 4%. Even Square is a flat 2.75% across all card types.

[Anonymous]

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@NRB525 wrote:

It is true that most AMEX cards have AF, but as pointed out, most have some sort of benefit possibility in the card features.

The thing to note, though, is that, afaik the no-fee EveryDay card is the only No-AF card you can earn transferrable points on, and transfer the points to airlines.  Citi, no, Chase, no, both require you to get a card with an AF to make points transfers. The FTF is high, but for everyday domestic spend to move to airlines, not a bad deal since there is no AF to earn out of.

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I thought with the Chase Sapphire (not preferred) you could still do transfers? Has this been nerfed?   As far as the chase portal bonus the CSR is 1.5cpp in travel booked on chase, CSP 1.25, and CS 1.  Right?

[longtimelurker]

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@Anonymous wrote:

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@NRB525 wrote:

It is true that most AMEX cards have AF, but as pointed out, most have some sort of benefit possibility in the card features.

The thing to note, though, is that, afaik the no-fee EveryDay card is the only No-AF card you can earn transferrable points on, and transfer the points to airlines.  Citi, no, Chase, no, both require you to get a card with an AF to make points transfers. The FTF is high, but for everyday domestic spend to move to airlines, not a bad deal since there is no AF to earn out of.

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I thought with the Chase Sapphire (not preferred) you could still do transfers? Has this been nerfed?   As far as the chase portal bonus the CSR is 1.5cpp in travel booked on chase, CSP 1.25, and CS 1.  Right?

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Sapphire never allowed transfers.   People switched to it to avoid the CSP fee but to keep 2x dining (and to store the URs if needed).