How does amex justify there higher fees?

[Anonymous]

for every transaction I mean. Is this why they are getting dumped by retailers.

[Open123]

By having a spendcentric business model and closed loop system.

In general, Amex offers cardmembers higher rewards (mainly travel related) on spend than other issuers, which appeals to higher spenders.  They ask Merchants for a higher fee (which is passed onto the cardmember as rewards) based on their ability with a closed loop system to have (1) a higher understanding of customer data points, and (2) greater control of the transaction process.  And, by accepting Amex's higher fees, the Merchant will profit by being frequented by higher spending Amex cardmembers allowing for higher revenues.

The higher fees allow Amex to pass on more rewards to its cardmembers, which in turn encourages their cardmembers to use their Amex cards more.  In addition, Amex's closed loop system and Merchant agreement allows for greater cardmember protection than other other issuer.

[happypill]

I think Amex's position in the marketplace has evolved in recent years.  Not too long ago (I don't recall, within the last decade I think?) there was no such thing as a third party Amex card.  The Amex network only processed Amex cards issued directly from Amex.  Then, there was some lawsuit that forced them to open their network to third party issuers like banks & credit unions.  Amex no longer had complete control over their entire system (cards, merchants, processing), and their pricing power has been eroding since.

Traditionally, Amex has provided the access to high-spend credit card users.  I believe Amex issues far fewer cards than Visa or MC, but Amex is #1 in terms of total spend across their network.  That will probably change once Costco leaves because that account for something like 8% of Amex cards and 10% of total spend on their network according to news articles.  If Amex can't deliver additional benefits compared with Visa/MC, they will have to try to compete on price.

[youdontkillmoney]

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@Anonymous wrote:

for every transaction I mean. Is this why they are getting dumped by retailers.

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AMEX goes to businesses and say our cardholders have more money, are wealthier and spend more. Our customers have average incomes of $200K, or whatever. You would want them to spend money in your stores. That will eventually make up for the fees we charge. It took a while, but amex made a deal with in n out and now in n out takes amex. But a deal could not be reached with costco of late.

[Open123]

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@happypill wrote:

I think Amex's position in the marketplace has evolved in recent years.  Not too long ago (I don't recall, within the last decade I think?) there was no such thing as a third party Amex card.  The Amex network only processed Amex cards issued directly from Amex.  Then, there was some lawsuit that forced them to open their network to third party issuers like banks & credit unions.  Amex no longer had complete control over their entire system (cards, merchants, processing), and their pricing power has been eroding since.

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This is true.

The accepted "pros" of Amex applies only to those cards offered by Amex directly as card issuer and payment processor, and not necessarily those offered by US Bank, Citi or BofA.

*Edited*  PS -  Even with cobranded issuers (meaning Banks issuing cards which is processed on the Amex network) rewars are generally higher than their Visa counterparts.  For instance, Fid Amex has higher rewards than their Visa.  BofA's old Amex had higher rewards than their Visa.

[Anonymous]

Does anyone know whatthe actual (or close) % of a persons tab goes to AMEX?  I know it is more than V/MC but is it that bad?

[dollar_bill]

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@Anonymous wrote:

Does anyone know whatthe actual (or close) % of a persons tab goes to AMEX?  I know it is more than V/MC but is it that bad?

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4% is what I've read.

[Open123]

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@Anonymous wrote:

Does anyone know whatthe actual (or close) % of a persons tab goes to AMEX?  I know it is more than V/MC but is it that bad?

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It differs and depends on the Merchant code and whether online or in person.  However, in general, Amex is roughly 1.5% - 2.0% more than a similar Visa/MC fee for a similar transaction.

For larger Merchants (Safeway, Target, Walmart, etc...) because of the volume discounts, the differences are much less, if any.

[Anonymous]

Because they're the best!

[Anonymous]

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@dollar_bill wrote:

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@Anonymous wrote:

Does anyone know whatthe actual (or close) % of a persons tab goes to AMEX?  I know it is more than V/MC but is it that bad?

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4% is what I've read.

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Oh wow, now I understand why the owner of one of my favorite places asked me to use a V or MC.