How much does american express charge merchants per transaction

The issue: Merchants pay a percentage of each charge to credit card companies. When American Express forms contracts with retailers, the credit card company prohibits retailers from encouraging shoppers to use other cards that charge lower fees. For instance, merchants who accept Amex card payments can't offer shoppers different prices depending on how they pay, even if the transaction fee is higher when they swipe an Amex. Retailers hate this because it's expensive.

According to the Brookings Institution, "Use a typical Visa or Mastercard branded credit card and the merchant will probably pay fees ranging in the 2 to 3.5% range. Leave home with an American Express and the merchant will pay even more, approaching 3 to 5%, depending on how much you charge." In the end, the merchant may pay out about 10% of what you pay them just for fees involved in the transaction, according to Brookings.

It all adds up. Last year, Amex made nearly $33.5 billion in revenue, of which $19.2 billion came from merchant fees.

Amex said in an email to BuzzFeed News that it has been lowering its fees, and that it now charges merchants, on average, a fee of 2.37% of per transaction. As for premium credit cards, a spokesperson said, "A merchant accepting Visa’s and Mastercard’s premium cards may actually pay more than they do for American Express when factoring in interchange, network and acquirer fees."

Data from the Nilson Report, which covers the card and mobile payment industry, puts Amex's average credit card fee at 2.33% versus 2.17% for Visa and MasterCard; Discover, at 2.09%, was the lowest.

Of course, merchants can choose not to accept Amex cards at all — plenty of smaller businesses don't. But then the merchants lose out on the business of customers who want to pay with their Amex, often to get points for rewards.

When they do take Amex, as Justice Stephen Breyer wrote, "Merchants generally spread the costs of credit-card acceptance across all their customers."

According to Brookings' economic studies fellow Aaron Klein, this means that merchants often end up charging the same price to all customers to offset the costs of pricier Amex cards, and this also affects customers who pay in cash. "Customers who use cheaper forms of payment are in effect subsidizing AmEx card holders," he wrote. "While it is only a few percentage points of each transaction, this subsidy adds up."

In 2010, the Obama administration and 11 states sued Amex, Visa, and Mastercard, saying that policies that prohibit merchants from steering customers to use certain cards are anti-competitive. Visa and Mastercard settled, but Amex went on to defend the practice.

Amex offers better rewards, and that has spurred innovation and — more importantly — competition in the world of credit card rewards, according to the court. "Amex’s business model spurred Visa and Mastercard to offer new premium card categories with higher rewards," Justice Clarence Thomas said.

And Amex's provisions "do not prevent Visa, MasterCard, or Discover from competing against Amex by offering lower merchant fees or promoting their broader merchant acceptance," Thomas wrote.

In a statement on Monday, Amex said, "As the Supreme Court stated today, '...Amex’s business model has stimulated competitive innovations in the credit-card market, increasing the volume of transactions and improving the quality of the services.'"

In his dissent, Justice Breyer said that the overall credit card industry could still grow even if credit card companies allowed merchants to steer customers to lower-fee cards. He also said that rather than prohibiting its retailer partners from doing so, Amex could be more competitive by lowering its fees or offering more appealing rewards than other credit card companies offer.

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

For merchants, it can be almost impossible to run a business without taking credit cards. However, the fees from these transactions can eat into profits, making it hard for some merchants with a small spread to stay afloat. The average credit card processing fee ranges between 1.5% and 3.5%. Just where do all these fees come from, and what can a merchant do to minimize them?

What Are Credit Card Processing Fees?

Credit card processing fees are the fees that a business must pay every time it accepts a credit card payment. There are multiple types of fees associated with each transaction, and fees can vary depending on the type of credit card accepted.

Interchange Fees

The interchange fee is a payment made directly to the card issuer for the swiped transaction. Fees may vary based on the type of card being used, the amount of the transaction and the industry the business is in. For example, credit card companies may charge higher interchange fees for online purchases since fraud is a bigger problem with these types of transactions.

Payment Processor Fees

The merchant services processor, also called a payment processor, can also charge a fee to facilitate the transaction. Merchant services fees include monthly fees, per-transaction fees, equipment lease fees and statement fees. This is how a processor makes its money since it gets none of the interchange fees.

Assessment Fees

Assessment fees are fees paid directly to the credit card network so that the merchant can use certain credit cards. This fee is based on monthly sales, not per transaction. When combined with the interchange fee, merchants refer to the total as a swipe fee.

Featured Partners

Transaction Fee

$99 per month + $0.08 cents per transaction

Transaction Fee

$29 per month + 1% for debit cards

Transaction Fee

Starting at $59

Transaction Fee

2.6% + $0.10 per card-present transaction

Typical Costs From Major Credit Card Companies

Typical Costs for Credit Card Processing

The costs for credit card processing will depend on the merchant services provider that you choose. You may have an interchange-plus scenario where the interchange and assessment fees are charged along with a flat monthly and per-transaction fee. The monthly fee may range from $9.95 to $20. The per-transaction fee can range from 0.18% plus $0.10 to $0.50% plus $0.10.

Let’s take a look at some examples from popular payment processors from our list of the best credit card processing companies.

Some companies prefer to use flat rates that combine all required fees into one simple transaction fee. This is often seen with online processors such as PayPal and even Stripe. The online fee may be different than a retail transaction because the card is presented to the cashier.

Bottom Line

If your business is similar to most others, being a cash-only enterprise would cost you a lot of business. But don’t overpay for credit card fees. With some shopping around, you can get the best-priced plans that fulfill your merchant services needs.

Frequently Asked Questions

What is the maximum credit card processing fee?

Merchants are not allowed to charge more than 4% of each transaction as a credit card processing fee.

Is there a way to avoid credit card processing fees?

Merchants can pass the cost on to the customer by charging a surcharge on every transaction that covers the cost of the fee. This surcharge is limited to 4%.

How can I lower my payment processing fee?

Talk to a credit card expert to see if your fees are more than what you should be paying. In some case, you can negotiate fees with credit card processors. You may gain more headway if you have policies that reduce the risk of credit card fraud, properly set up terminals and use an address verification system.

Is credit card processing secure?

Yes. Because so much sensitive information is being transferred across these networks, credit card processors are PCI-compliant and use advanced encryption methods to secure transactions.

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