[philip1209]

> "[. . . ] American Express (the card that plenty businesses hate) [ . . . ]"

This is divergent, but I feel compelled to defend Amex here on the basis of quality of leads and consumer ethics, with the main contention being a higher processing fee for Amex relative to Visa and Mastercard.

# Quality of leads

"Amex cards account for approximately 24% of the total dollar volume of credit card transactions in the US, the highest of any card issuer" [1].

In general, merchants absorb credit card fees because they allow consumers to make purchases in more spur-of-the-moment situations. For example:

* "I want this $4 coffee, but I don't have cash. Without a credit card, the purchase would not occur."

* "I want this $1000 refrigerator, but I lack the cash to pay for it all at once. A credit card allows me to purchase it now and deal with the implications later as I pay for it over time."

* "I want this $1000 refrigerator, but I don't normally carry that much cash on me, so making this impulse decision is enabled by my credit card."

* "I want to buy a $400 lunch for our client, but I can't have direct access to my company's money."

American Express may charge a higher percentage per transaction, but Amex users in general spend 2x-4x per transaction relative to other credit-based cards [2], thus in the end justifying their higher fee per transaction overall in the business that credit cards generate. This is due to both the demographics of consumers using Amex and the higher percentage of businesses using Amex. Thus, the lattermost two situations above are ostensibly inflated for Amex, therefore justifying a higher percentage fee.

For smaller retailers, they may see that only 10% of their customers use Amex, but they may neglect to factor in the whole buying process of "I lose ~20% of revenue if I refuse Amex, because Amex users spend double per month, so the 50% upcharge over Visa/Mastercard is justified." Starbucks understands this, which is why they do not refuse an Amex for a $1 cookie - they understand that the guy purchasing $30 of coffee for the business meeting is likely doing so on a company Amex.

So, while a retailer may be angered by the occasional Amex user who brings tighter margins, in the overall scope of things the quality of lead is sufficiently higher for Amex users to justify a higher percentage fee.

Note: Here I use "quality" for a lead to represent frequency of purchase, per-purchase volume, and credit reliability.

# Consumer Ethics

I personally use an Amex charge card for my day-to-day transactions because of the revenue breakdown of Amex verus the other major cardholders.

"Visa and MasterCard get about 20% of their revenues from merchant fees. American Express gets 65% of its revenues from merchant fees, because it relies less on interest payments (most American Express card holders don't carry a balance)." [3]

This is an opportunity for me to 'vote' with my pocket book, and I think that the yearly cost of an Amex justifies the service. A fradulent transaction is easy to erase because American Express profits from me as a happy and successful consumer. Furthermore, with a charge card, I cannot dig myself into a pit of debt - if I cannot pay my transactions one month, I cannot continue charging the following month, thus hurting both me and American Express. The business model is profitable when I balance my finances and maintain good finances, whereas the other major card companies profit mainly when I start to fall into a pit of debt. I feel that this revenue model thus benefits me as a consumer, rather than intentionally setting me up for failure.

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Overall:

As an entrepreneur building my own businesses, I accept Amex because I value the free market decisions of my consumers to use Amex, and in the overall scope of transactions, their educated decision behooves both of us.

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[1] http://en.wikipedia.org/wiki/American_Express

[2]http://www.wikinvest.com/stock/American_Express_Company_(AXP...

[3] http://seekingalpha.com/article/20331-guide-to-credit-cards-...

[AjithAntony]

>"Visa and MasterCard get about 20% of their revenues from merchant fees. American Express gets 65% of its revenues from merchant fees, because it relies less on interest payments (most American Express card holders don't carry a balance)." [3]

Real citation needed. That Seekingalpha link is very wrong. Visa and MasterCard probably derive 100% of their revenues though merchant fees and similar. They neither lend money nor collect interest from consumers. The usurious interest rates and fees that you are trying to "vote" against are coming from the banks that issue the cards. Visa And mastercard profit by encouraging use of their card networks for every purchase. They don't care about your "pit of debt."

I'm not sure how paying an annual fee to Amex and forcing merchants to process your expensive card is helping anyone other than further enriching Amex, which in addition to being a payment network, is also operating as a bank as far as extending loans to and collecting interest from its "cardmembers." If Amex's other value added services such as rewards, return protection or whatever make it worthwhile, for your business to pay the membership and merchant fees then so be it.

My personal "vote with my dollars" strategy is to use cash for transactions where a credit card does not add value to my user experience and not to unnecessarily punish businesses with small purchases on credit. I use a Visa card because it is accepted most everywhere. I do use a "rewards" card so I do carry some guilt for any extra merchant fees that may incur.

  - Pay for gas at the pump: credit.
  - Pay for online goods: credit.
  - Pay for an expensive item with not enough cash in pocket: credit
  - Pay for a $2 coffee: cash
  - Pay for a round of beers at the pub (where a credit card will add an extra round trip for the bartender to get back to me): cash
  - Pay for anything at a local restaurant: cash
  - At McDonalds and somewhoe don't even have $2 in my pocket: credit

https://materials.proxyvote.com/Approved/025816/20120301/AR_...

http://media.corporate-ir.net/media_files/IROL/21/215693/Vis...

[salman89]

While I agree with some of your points here, you are ignoring that an Amex user does not have a second card based method of purchase.

I would assume that most Amex users always have another method of payment, considering how likely they are to run into a situation where Amex is not accepted.

With this logic, the business will only lose revenue from customers whose only form of payment is Amex - I think this would be a small subset.

[philip1209]

Some disjointed thoughts:

* If a consumer favors their Amex over their other cards, then they favor retailers who accept Amex. Thus the higher fee is justified with more repeat business.

* My mother's company has one line of credit: her Amex. If her Amex is refused, she has to pay with her personal credit or debit card, then go through the rigmarole of a personal refund. In corporate America, Amex is the standard due to its ease of internal accounting and external reputation. With the former, the better reporting of transaction information justifies its use in the accounting department. With the latter . . .

* Amex has established itself sufficiently as a luxury brand,

e.g. if you take your client out to lunch, it could be out-of-place to pay with anything but an Amex.

Furthermore, if your business does not accept Amex, it alienates luxury-seeking consumers

e.g. if a Michelin-starred restaurant refused an Amex card, it would experience a more precipitous drop in return rate than if a neighborhood diner refused Amex.

* "the business will only lose revenue from customers whose only form of payment is Amex" -> This is true on a per-transaction basis, but I defined "quality" to include repeat business and, per my first above point about business, restricting consumers could discourage repeat business.

[rscale]

I'm an Amex user who has a second card in my wallet, but I avoid giving business to stores that don't take Amex. I feel like it's a sign that they don't understand me, and don't want my business.

[mjw]

"Amex cards account for approximately 24% of the total dollar volume of credit card transactions in the US"

Personally I use amex for all large transactions because they give me a cut (I think around 0.5% cash equivalent?) in air miles, but don't usually bother with it for small transactions because I don't want to risk it being turned down, or take the piss with small merchants who might suffer from the processing fees.

Perhaps this kind of behaviour explains their bigger cash volume, rather than their customers necessarily being bigger spenders in total across all the cards available to them.

[zecho]

I always lead with my Amex, even if I know the place doesn't take it. Merchants need that kind of feedback from their customers. If they won't take Amex, I've got other cards, but I always prefer to use either my Amex or my Discover (another card with spotty acceptance).

[lmm]

So Amex only offer their cards to rich people (who are better at managing their balances, and spend more money), and then uses the fact that their customers are rich as leverage to charge merchants more? And you see this as a positive?

[jamesaguilar]

Hang on, is it good to help poor people hang themselves with credit card debt now? I didn't get the memo.

[philip1209]

They don't have to be rich.

* The fact that they pay an annual fee (even with Zync) means that they have "skin in the game" - if they use the card more, the fee is diluted on a per-purchase basis.

* "customers are rich" - it's not necessarily that customers are rich, but that they spend more per month. This more specifically applies to business customers. For example, my carpentry business could use Amex as the company card, and while I could spend a lot of money per month buying carpet to install, it doesn't mean that I am rich.

* Higher income can disproportionately correlate to dispensable income, and credit cards are more likely to be used on dispensable income (e.g. restaurants) rather than more core needs (e.g. rent)

* " Various sociological statistics suggest the severity of wealth inequality 'with the top 10% possessing 80% of all financial assets [and] the bottom 90% holding only 20% of all financial wealth.'" [1] -> Even if Amex just offers their cards to rich people, it's an objectively viable business model that in itself justifies the higher transactional fee.

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[1] http://en.wikipedia.org/wiki/Wealth_inequality_in_the_United...

[hatcravat]

Amex does have a few cards without an annual fee... at least the Blue series do not, and possibly others. Blue cards are more like a credit card than a charge card, though.