Unlike Visa and Mastercard, who publish their discount rates (known as interchange fees), American Express does not.  However the American Express 2007 Annual Report reveals that, on average, Amex’s discount rate was 2.56% (2007), 2.57% (2006) and 2.58% (2005).  That is about 0.77% higher than the average Visa interchange rate, which is 1.79%. However, that average includes the much lower rates that American Express charges some very large companies.  For example, the book Paying With Plastic (P.196), describes the sweetheart deal between American Express and Costco. Read more

For card not present transactions (including those conducted over the internet) the way to get the best interchange rate is to do address verification.  Address verification involves entering the customers’ address and transmitting it across the processing network, where it is compared with the customer’s address on file with his/her credit card company. A response code is returned to tell the merchant if the address was a full match, partial match or not a match. Read more

Pizza is one of my favorite foods, my favorite pizza places here in Chicago are Coalfire and Pompei.  Here is my estimate of how much an average pizza shop pays to accept credit cards: Read more

Big businesses, some of which provide credit cards to thousands of employees to make corporate purchases, like to have data about where and on what their employees are spending money.  Even though such businesses typically do not carry a balance on their credit cards (they can borrow much more cheaply from banks or the bond market), they conduct so many transactions that Visa, Mastercard and American Express compete fiercly for their business. Making these customers even sweeter, interchange rates for business cards are much higher than for consumer cards.  For example, a retail transaction using a Visa business card would qualify for the Commercial – Retail interchange category and cost 2.20% + $0.10 while a retail transaction using a non-rewards Visa consumer credit card would qualify for the CPS/Retail (Credit) interchange category and cost 1.54% + 0.10. Read more

Reporting Level II transaction data can result in lower interchange rates for purchases made with a corporate credit card. To qualify for level II the following data must be included with the transaction: Read more