OptBlue provides potential benefits to businesses in the form of transparency and reduced costs over current American Express’s old One Point pricing, but it also opens the door for uninformed businesses to overpay.
If you’re looking for an American Express merchant account, here’s what you’ll need to look for – and what to avoid.
- What is OptBlue?
- OptBlue Rates & Fees
- Processor Markup
- Is OptBlue really cheaper?
- OptBlue Price Gouging
- Processor Implementation
What is OptBlue?
OptBlue is an American Express merchant account pricing model. It’s available to businesses that accept $1 million / year or less in Amex payments. (If you accept more than $1 million / year, you have to go directly to Amex using the ESA pricing model.)
Rolled out in 2015, OptBlue replaced American Express One Point. OptBlue lets you accept American Express cards through the same credit card processor you use for Visa, Mastercard, and Discover. It also uses a set of “base” rates that are the same for every processor. Processors then add a markup on top of those base rates.
While technically not called “interchange,” the OptBlue base rates function similarly to Visa and Mastercard interchange fees. If you’re not familiar with interchange, we have a great article on how interchange fees work.
We’ll break down the pricing model in the rest of this article.
As noted above, businesses that process less than $1 million in annual American Express volume are eligible for OptBlue. If a business currently processes in excess of $1 million, or when a business reaches $1 million in Amex volume, it must sign a merchant processing agreement directly with American Express instead.
OptBlue Rates & Fees
Since OptBlue functions on a base rates + markup model, there are a few different components of cost. There are the Amex “wholesale” or “base” rates (which function similarly to interchange fees), Amex “assessment” fees, and markup fees that your processor adds.
The base rates stay the same for every processor, as American Express sets those rates. The markups change from one processor to another.
American Express Rates
American Express’s base rates and fees are the same for all processors. In the table below, you’ll see that OptBlue pricing categories consists of two fees — the first is a percentage (the rate), and the second is a flat cents amount (the transaction fee).
|Industry||Transaction Size||Volume Rate||Per-Transaction Fee|
|Retail||Less than $75||1.60%||$0.10|
|$75.01 – $1,000||1.95%||$0.10|
|Greater than $1,000||2.40%||$0.10|
|Services||Less than $400||1.60%||$0.10|
|$400.01 – $3,000||1.95%||$0.10|
|Greater than $3,000||2.40%||$0.10|
|Restaurants / Caterers||Less than $25||1.85%||$0.10|
|$25.01 – $150||2.45%||$0.10|
|Greater than $150||2.75%||$0.10|
|Mail Order and Internet||Less than $150||1.70%||$0.10|
|$150.01 – $3,000||2.05%||$0.10|
|Greater than $3,000||2.50%||$0.10|
|Healthcare||Less than $150||1.55%||$0.10|
|$150.01 – $2,000||1.85%||$0.10|
|Greater than $2,000||2.30%||$0.10|
|B2B / Wholesale||Less than $400||1.55%||$0.10|
|$400.01 – $7,500||1.80%||$0.10|
|Greater than $7,500||2.25%||$0.10|
|Lodging||Less than $100||2.25%||$0.10|
|$100.01 – $1,000||2.60%||$0.10|
|Greater than $1,000||3.00%||$0.10|
|Travel & Entertainment||Less than $100||2.25%||$0.10|
|$100.01 – $1,000||2.60%||$0.10|
|Greater than $1,000||3.00%||$0.10|
|Prepaid||Less than $75||1.35%||$0.10|
|$75.01 – $1,000||1.70%||$0.10|
|Greater than $1,000||2.15%||$0.10|
|Other||Less than $100||1.50%||$0.10|
|$100.01 – $3,000||1.85%||$0.10|
|Greater than $3,000||2.30%||$0.10|
Like Visa and Mastercard’s interchange, OptBlue consists of many pricing categories (about 132), and several variables impact the pricing category to which an OptBlue transaction is routed. These variables are a business’s acceptance method (card-present or card-not-present), merchant category code (MCC), and its average sale amount (also referred to as average ticket).
For example, a retail business that swipes a transaction for $80 will have its transaction routed to a different OptBlue pricing category than a restaurant that keys in a $250 transaction. The resulting rate and fee for each transaction will differ, but it will be the same regardless of the processor a business is using.
For this reason, when comparing credit card processors, the rate and fee paid to American Express is far less important than the markup paid to the processor.
American Express “Assessment”
OptBlue pricing brings with it another similarity to Visa and MasterCard’s pricing structure in the form of a 0.15% fee paid to American Express that is based on gross volume.
American Express’s fee (called an assessment or sponsorship fee) is slightly more than the volume assessment charged by Visa and MasterCard, which you can see here.
Like OptBlue wholesale rates, the OptBlue assessment is a cost is consistent for all processors.
American Express also imposes a 0.30% surcharge on all card-not-present (CNP) volume. It’s important to note that this CNP surcharge is in addition to the assessment of 0.15%. That brings to total fee on card-not-present volume to 0.45% (0.30% CNP surcharge + 0.15% assessment).
We’re fielding a lot of questions from our clients about pricing as more and more processors make the switch from OnePoint to OptBlue. One of the more common questions is why Amex has opted to add a blanket surcharge of 0.30% to all card-not-present volume instead of simply raising its base card-not-present rates by the same amount.
Frankly, it’s unclear to us why Amex has chosen this pricing structure. Unfortunately, Amex has not clarified.
We are now keeping an updated list of American Express assessments on our credit card processing fee page.
The processor’s markup is the only component of cost that varies with OptBlue. The costs resulting from base rates and assessments paid to American Express are the same for all processors.
So, as with Visa and Mastercard, the way to get the lowest total OptBlue pricing is to choose the processor that offers the lowest markup over base cost. Achieving the lowest markup starts with the ideal pricing model.
Processors can use two general types of pricing to pass the costs of OptBlue and markup to a business. The first and most widely used is interchange plus and the second is tiered or bundled.
The cost-plus pricing model with OptBlue functions in virtually the same way that the interchange-plus pricing model functions with Visa and MasterCard. I prefer to call it cost-plus in reference to OptBlue because American Express’s base costs aren’t technically interchange.
So, semantics aside, a cost-plus pricing model is where a processor adds a fixed markup to the base cost of processing, which in this case is OptBlue rates and fees plus Amex’s assessment.
The processor’s markup takes the form of a percentage (such as 0.15%) a transaction fee (such as $0.10) or both. Cost-plus is the preferred pricing model since it’s transparent and has the potential (more on this later) to be lowest cost.
You can find more detail on interchange plus at the link above. That article is about interchange-plus pricing for Visa and MasterCard, but the fundamentals of how interchange-plus functions are the same when applies to cost-plus for OptBlue.
Processors can also charge businesses for OptBlue using a tiered pricing model (also called bundled pricing).
Tiered pricing is opaque and potentially more expensive when compared to cost-plus, so it’s not the optimal pricing model for OptBlue.
Tiered pricing for OptBlue functions in the same way it does when processors use a tiered model to charge fees for Visa and Mastercard. Essentially, the processor routes OptBlue base rates through a few (often three) rates of its own. Typically, you’ll see “qualified,” “mid-qualified,” and “non-qualified” rates. You’ll only sees those processor’s contrived rates, with no understanding of the OptBlue cost behind them. Without the OptBlue rates, you’ll be unable to calculate the processor’s markup.
Is OptBlue Really Cheaper?
Yes, if you have a competitive markup. That’s the important thing to remember.
The OptBlue base rates are lower than the old One Point rates. But with OptBlue (unlike One Point) processors are free to add markups on top of the rates. So, it will only be cheaper if you secure a low markup.
Earlier in this article, I posted the table of OptBlue base rates. Below, this table outlines basic American Express discount rates on the old One Point model. You can see for yourself that these rates are more expensive than the base rates for OptBlue in the earlier table.
|Business Type||American Express Discount Rate & Transaction Fee|
|Fast Food Restaurant||3.50%|
|Mail Order & Internet||3.50%|
|Restaurant *||3.50% plus a $0.05 transaction fee|
|Independent Gas Stations||3.25%|
|Retail *||2.89% plus a $0.10 transaction fee*|
|Services, Wholesale & All Other||2.89% plus $0.15 transaction fee*|
|Office-based Doctor, Dentist, Orthodontist||2.55%|
|Healthcare not office-based||2.89% plus $0.15 transaction fee|
* A surcharge of 0.30% will apply to transactions that are not swiped. For example, keyed-in, e-commerce and other card-not-present transactions will be charged a discount fee of 3.80% instead of 3.50%
Despite being around for several years now, many businesses aren’t aware that it exists. Business owners that are aware of OptBlue often don’t know how it works. In both cases, the stage is set for a processor to overcharge for Amex fees.
The final rate a business pays is no longer set by American Express. The markup the processor charges dictates the final total. Markups applied by processors will differ, and businesses that don’t shop on markups will overpay.
For example, if a lodging business previously paid 3.5% to accept American Express on the old One Point model, it may be eligible for base costs as low as 2.25% on OptBlue. The best processors will add a small markup. If your processor charges 0.30% for American Express, you’d end up with a rate of 2.55%, almost a full percentage point lower than the old model. However, if you don’t know what to look for, you could end up with a high markup. In fact, there’s nothing stopping a processor from adding a markup to keep your rates at 3.5%, pocketing the difference between the old One Point pricing and the new OptBlue base rates. It would be up to you to recognize that and take action by finding a new processor. CardFellow members can rest assured that CardFellow experts monitor your OptBlue markups during your free statement audits.
Knowing base costs and how OptBlue functions will allow your business to shop effectively for the most competitive markup. If you need assistance, you can use CardFellow’s free tools to see OptBlue pricing and compare processor markups.
Related Article: Did OptBlue Backfire for Small Businesses?
As of 2019, most processors support OptBlue. However, some businesses may still be on an older pricing model. If you’re confused on your options with Amex or want to find out if switching to OptBlue can save your business money, use CardFellow’s free quote request tool to see how much you’ll pay.