Once the issuer approves the transaction, the payment gets sent back through the chain. As you might expect, everyone along the line expects to get paid for their services. That means each credit card transaction comes with its own fees. Most businesses work with a credit card processing company, which provides the card terminal where you use your card. The processor is responsible for sending the transaction information to the credit card network, which acts as a relay between the processing company and your issuing bank. Payment processing fee: This is the cost paid by the business to the processing company.Assessment fee: This fee goes to the credit card network. (In the U.S., this is usually Visa, Mastercard, Discover, or Amex.)Interchange fee: The bank that issues your credit card gets this fee.
Businesses pay multiple credit card fees Given how popular Amex cards undeniably are, why are they most often the ones you can’t use? Like most things these days, it all comes down to cost: Amex credit cards simply cost businesses more money to accept. As a result, some businesses, especially small businesses with slim profit margins, simply choose to not deal with Amex at all.
To understand the problem, you need to understand the basics of how credit cards work. Credit cards represent a line of credit with a bank, which we call the credit card issuer. When you make a purchase at a business using your card, the transaction needs to be sent to your issuer, and the money needs to make its way back to the business. More often than not, if a business restricts the type of credit cards it accepts, it’s American Express that gets the short end of the stick. This can be a big problem for fans of rewards credit cards, as Amex offers a number of hugely popular products. From travel rewards cards to cash back cards and even business credit cards — if you have multiple rewards cards, chances are good one of them says “American Express” on it.
When it comes to setting fees, Amex doesn’t believe in undervaluing itself. Of the four major credit card networks, Amex has the highest fees on average, charging more than a full percentage point higher than its competitors in some cases. When you’re a small business already operating on a profit margin of a few percentage points, forking over an extra 1% to a credit card company can make a huge dent in your bottom line. American Express acts as both the credit card issuer and the credit card network for its cards. That means it controls both the assessment and interchange fees — and gets to keep them both.
Amex tends to charge higher fees The total cost of a credit card transaction varies dramatically based on a number of factors, such as the type of transaction and the type of card. Premium rewards cards can have higher fees. But, of course, the main determinant is the actual companies involved.
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