Why Some Small Business Owners Won’t Take American Express – and What to do About It If You Do

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Let me start off by saying that I like the conveniences of being an American Express cardholder, but as a merchant, it can be frustrating at times. Here are the popular reasons I hear when other small business owners tell me they won’t take AMEX.

Reason #1 – Chargebacks

While it may not be fair to American Express, there are quite a number of folks who say that AMEX is “notorious” for siding with the customer in a charge-back dispute.

At a previous business, I once had a customer who used our AMEXsoftware for over a year and was paying us software licensing fees in excess of $1,000 per month. When the customer filed for bankruptcy and his business shut down, he called AMEX and claimed that all charges to his credit card from our company – going back months – were all fraudulent.

AMEX immediately reached into our bank account and froze the funds… nearly ten thousand dollars. For a small business, this was a significant amount of our working capital to be taken out of our account. We had to fight for weeks and show the AMEX arbitrator that these were legitimate charges.

Since many other small business owners use AMEX, I wouldn’t suggest that all business owners refuse to take it, but just be aware that large purchases – especially those made over the Web – can lead you to an awkward position if former customers request a chargeback.

Reason #2 – Wait time to get paid

While it may be different for different types of businesses, American Express charges can take longer to clear than Visa/Mastercard. Visa and Mastercard are actually the same company, so charge reciept times for monies due usually take the same amount of time despite the card type.

Waiting four, sometimes up to six business days to get paid from AMEX can be painfully long – especially for larger amounts. Small businesses that have products or other hard goods “floating” between shipment-payment-due and receipt-of-funds from AMEX are especially wary of this.

Reason #3 – Transaction fees are higher than other cards

When many of us open a small business and begin taking credit cards, we usually don’t tabulate the fees associated with the monthly service or transaction fees for each charge. We’re often happy that we’re getting customers! But as your business grows, those transaction fees really add up. Many of us stare at our monthly charge fees and think, “Wow, this is really adding up!”

Find Good merchant BanksAMEX transaction fees are typically higher than Visa/Mastercard (or other cards) and because of that, smaller retail customers who have smaller transactions (like liquor stores or restaurants) often will not take AMEX.

After all of this complaining, what happens? Do I actually have a suggestion to help other fellow small business owners? Actually, yes –

I recently ran into a startup called Fee Fighters. You can quickly enter the approximate amounts of how much you charge in credit cards each month, size of average transaction, type of business, etc. and they’ll give you an instant report of the merchant banks who can provide more competitive fees. They save us about $700 a month which adds up to over $8,000 a year. Try it and see how much you can save!

* I am not associated in any way with Fee Fighters, nor am I getting paid to mention them in this post. Find out more about their auction-like system on their site.

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  • http://dmcrf.com DMC

    Had a company ordered a lot of parts on AMEX. After they received the parts, cancelled the transaction and AMEX left us hanging. Even with proof of signed delivery they did nothing. Most AMEX customers are good but will not accept any order over a certain amount from AMEX anymore.

  • CorineParmley

    Fantastic writing – For what it’s worth , if your company is interested a CA FL-105/GC-120 , I filled a fillable version here http://goo.gl/MQDf7Z