Understanding American Express Merchant Services

There’s a lot of confusion about American Express merchant services. We regularly field questions about discount rates, pricing models, and settlement. In this article, we’ll explain everything you need to know about accepting American Express at a business.

Just looking to see costs to take Amex cards? For the most up-to-date pricing, use our free quote tool, available to CardFellow members. If you’re not a member yet, it’s free and signup only takes a minute. Become a CardFellow member.

If you have specific questions about your existing American Express merchant account, please contact your credit card processor or Amex.

• How is Amex Different? The Closed Loop Network
• American Express Pricing Models
  • Amex ESA
  • Amex OptBlue
• American Express Discount Rates
• American Express Settlement
  • OptBlue Settlement
• Should You Accept American Express?
  • Amex Use by Industry
  • American Express Fee Credits
• Opening an American Express Merchant Account
• Transferring an American Express Merchant Account
• Getting the Best Amex Pricing

How is Amex Different? The Closed Loop Network

American Express operates on a closed loop network. This means that American Express issues credit cards directly to its cardholders, and opens merchant accounts directly for business that accept its cards. Other card brands, like Visa and Mastercard, have relationships with banks to issue credit cards. Additionally, Visa and Mastercard do not open or maintain merchant accounts for businesses. Instead, that role falls to credit card processors.

Since American Express does not have to answer to any other financial institution for issuing or acquiring, the company is free to set its discount rates at whatever level the market will bear. What Amex chose to do was set a rate that was the same for all processors, and not permit processors to add a markup. The rate was high – it cost significantly more to process American Express credit cards than Mastercard or Visa credit cards.

However, Amex has made changes that affect pricing. Specifically, the company introduced a new pricing model and service that allows processors to handle merchant accounts for businesses and add a markup. That pricing model, called OptBlue, is a fundamental shift that has the potential to lower your Amex acceptance costs. Unfortunately, a lot of business owners are not aware of Amex OptBlue, and processors can use that to their advantage. If you’re looking for the lowest costs to take American Express, you’ll need to know about pricing models and what your processor charges for a markup.

American Express Pricing Models

Amex currently has two pricing models: ESA and OptBlue. OptBlue is the newest, and the most similar to Visa and Mastercard’s models. It was rolled out in 2015, and replaced the Amex OnePoint model. ESA is the direct processing program, meaning you work with Amex directly rather than a third party. Let’s take a look at these two options in greater detail.

Amex ESA

As noted above, Amex ESA is American Express’ direct processing program. That means a business will have an account directly with American Express, and Amex will settle the transactions. Businesses that process $1 million or more per year with American Express must have a direct account – you can’t go through your processor once you’re at that volume.

If you process less than $1 million / year in Amex transactions, you may still be able to go direct, but there usually isn’t a reason to do so. Instead, the OptBlue program will allow you the convenience of consolidated reporting and working with your processor to determine your Amex pricing.

Amex OptBlue

OptBlue is an American Express pricing model that allows you to get an Amex merchant account through a credit card processing company, rather than Amex itself.

It replaced the OnePoint program (also sometimes referred to as American Express Full Service) and streamlines the authorization, settlement, and reporting of your Amex transactions. Unlike OnePoint, OptBlue allows processors to add a markup to Amex’s base rates, thus creating different rates for American Express among processors.

This is similar to how Visa and Mastercard work. There are base rates (interchange rates, for Visa and Mastercard) and the processor adds their markup to those rates. The base rates are the same for every processor – and non-negotiable – and the markup is the only component that varies.

While American Express doesn’t call their base rates “interchange rates,” they function the same way. The base rates are the same for all processors (and non-negotiable) and processors add a markup to those base rates.

For full details on OptBlue, including the base Amex “interchange” rates, see our article American Express OptBlue.

American Express Discount Rates

American Express discount rates are based largely on a business’s merchant category code (MCC). Unlike Visa and Mastercard interchange fees, American Express discount rates have relatively few qualification factors.

American Express discount rates for retail stores and restaurants will downgrade (meaning the rate increases) if a transaction is keyed-in rather than swiping a card, but most rates are the same regardless of transaction method.

American Express does not charge a credit card transaction fee and a discount rate for every industry category. Many rates consist of a percentage-base charge (discount rate) without a transaction fee (flat dollar amount, i.e. $0.10).

However, virtually all credit card processing services will charge a fee to process American Express transactions through their network. So, even if American Express does not charge a transaction fee directly, a business will inevitably have to pay a transaction fee to its credit card processor for processing American Express transactions.

It’s a little difficult to get a feel for your American Express costs just from reading about the typical cost format. If you’d rather see real quotes for your specific business, use CardFellow’s cost comparison tool and select that you’d like to accept Amex. Try it now.

American Express Settlement

Some American Express transactions take longer to settle than Visa and Mastercard transactions. This means that deposits for American Express credit card sales take longer to show up in your business checking account than deposits for Visa and Mastercard sales.

Barring a processor-imposed risk hold, Visa and Mastercard transactions are generally settled within 24-48 hours, meaning that deposits will show in your business checking account 24-48 hours after approved authorizations are sent to the processor for settlement.

With the exception of OptBlue, American Express transactions typically take almost twice as long to settle as Visa and Mastercard transactions. Deposits will generally take three to seven business days to show up in your business checking account.

OptBlue Settlement

OptBlue makes it possible for a processor to settle American Express processing volume along with Visa, Mastercard, and Discover volume. Instead of receiving a separate, delayed deposit for American Express transactions, all credit card sales are sent in a single deposit in the time it takes to settle Visa and Mastercard volume. This means that American Express volume settles roughly one to four days faster through OptBlue than it does with a traditional American Express merchant account.

OptBlue also streamlines the reporting of American Express volume. Instead of receiving a separate statement for American Express transactions, you’ll receive a single monthly statement for all card charges.

Should you accept American Express?

In the past, high discount rates and delayed settlement led many businesses to give careful consideration to the costs and benefits associated with accepting American Express credit cards. In fact, we help many businesses here at CardFellow that choose not to accept American Express, citing the costs. OptBlue has the potential to help keep Amex costs down, but it will still typically cost more than Visa or Mastercard transactions.

Customer demand and cash flow requirements are typically the primary determining factors when considering whether or not to accept American Express.

Businesses that cater to a professional clientele or that operate within the travel and tourism industry will likely be forced to accept American Express due to customer demand. Many corporate cards are Amex, as are rewards cards favored by wealthy clients that are likely to travel.

Amex Use by Industry

The following table provides an estimate of the percentage of total charge volume that American Express will account for within a given industry. Businesses that operate within industries with a high percentage of American Express volume should strongly consider accepting the card.