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 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.

Industry American Express % of Total Charge Volume
Restaurant / Food Service 35%
Travel & Tourism 35%
Supermarket & Grocery 3%
Retail 15%
E-Commerce & Mail-Order 15%
Entertainment 25%
Business-to-Business Service & Wholesale 15%

As you can see, restaurants and travel businesses are the most likely to see Amex cards, followed by other businesses in the entertainment industry. On the flip side, supermarkets are the least likely to experience negative repercussions by not accepting Amex.

Businesses that require steady cash flow should give careful consideration to the extended settlement time associated with American Express processing volume. If cash flow is a concern and customer demand for American Express is high, OptBlue can help alleviate those issues.

American Express Fee Credits

Another factor when considering whether to accept Amex is interchange credits. A little-known “hidden” credit card processing fee is associated with issuing a customer refund. The issuing banks of Visa, Mastercard and Discover will reimburse businesses a portion of fees when a customer is given a refund. American Express does not refund fees unless you agree to pay a higher rate for transactions.

On page 21, section 4.7 of its Merchant Reference Guide, American Express states (bold and underline added by CardFellow):

“A Credit may occur when a Merchant processes a refund for purchases or payments made on the Card. If the Merchant issues a Credit, we will not refund the Discount or any other fees or assessments previously applied on the corresponding Charge, unless the Merchant elects to increase its Discount Rate by 40 basis points (0.40%), in which case, if the Merchant issues a Credit, we will refund the Discount (but not any other fees or assessments) previously applied on the portion of the corresponding Charge that has been credited.”

Essentially, a business has to pay more up front to receive a refund on fees for returns. American Express is a winner either way. If you’re in a business that regularly issues refunds to customers, the money you lose in fees can add up quickly.

Note: Even though Visa, Mastercard and Discover refund some fees, processors often intercept the refund before it reaches the business. Read how to stop your processor from stealing your refunds in the article below.

Related Article Don’t Lose Money on Credit Card Refunds.

Opening an American Express Merchant Account

It is not necessary to contact American Express directly to open a merchant account unless you process in excess of $1 million/year in Amex alone. If you choose to accept American Express, your credit card processor will be able to open an American Express account on your behalf using the OptBlue model.

The processor will integrate your American Express merchant account into your credit card machine, gateway, or other processing solution so that all card brands can be processed through the same system.

If you don’t have a processor yet, we can help you find one.

Transferring an American Express Merchant Account

A business cannot have more than one American Express merchant account. If a processor opened an account for your business in the past, a new processor will not be able to open a new American Express merchant account on your behalf.

Instead, you will have to provide the new processor with your existing American Express merchant account number so that they may reference the account when configuring your credit card machine, gateway, or other equipment.

If you have lost your American Express merchant identification number, you will need to contact American Express directly. Processors cannot obtain a lost merchant ID number on your behalf.

Getting the Best Amex Pricing

With two pricing models and any number of processors promising different rates and fees, how do you really know what you’ll pay to accept American Express and if it’s good pricing? The easiest way to see exact costs is to use a price comparison tool – it will show you the actual amount you can expect to pay when you accept American Express. CardFellow has made that easy for our members. We offer a handy tool that lets you see the real costs of accepting Amex at your business. If you’re not a member yet, you can become one at the same time as putting in details to see Amex pricing. It’s free and there’s no obligation. Try it now!

2 thoughts on “Understanding American Express Merchant Services”

  1. We need to know what fees you charge if a customer is using Amex cards & how long it takes for payments to hit our bank.

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