American Express Discount Rate

January 10, 2010

January 10, 2010

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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 […]

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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.

 

In 1999, American Express and Costco…announced that they would be partnering to offer American Express consumer and corporate charge cards that also functioned as Costco membership cards…as a result of the partnership, American Express became the only payment card to be accepted at Costco, which had only accepted Discover for the previous eight years.  Industry estimates suggested that the merchant discount paid by Costco to American Express was as low as 1.1 percent.

 

Small stores more typically will pay a 3.25% – 3.75% discount.

 

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harold says: January 10, 2010 at 7:37 am

As a dentist American Express charges me 2.9%. It’s not much higher than what I pay to accept Visa and Mastercard business cards.

I experience a typical higher gross sale amounts with my American Express customers which offsets the higher fees.

Happy Card User says: January 14, 2010 at 1:00 pm

I think in making these comparisons it’s only fair to also factor in the following:

A) Lost revenue from “bad” checks
B) Lost revenue from counterfeit currency
C) Cost of security, storage, and transport of hard cash
D) Lost revenue from internal theft of hard cash (e.g., employees)
E) Lost revenue from external theft of hard cash (e.g., robberies)

Once these items are factored in, I believe the argument for card use is more compelling.

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