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American Express: What Makes it So Different?

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Anyone who has ever used American Express knows that it is not uncommon to have businesses reject their card. Most likely there is not anything wrong with the card it self. Rather, American Express uses a different credit card processing system than their competitors. This unique credit card processing system has made American Express least favored card by merchant with the biggest rewards for its cardholders.

What Makes American Express So Different?

Unlike Visa and MasterCard, American Express does not get their revenue from interest fees. American Express’s revenue comes from their annual fee of $450 and a higher swipe fee from merchants. This increased swipe fee means virtually nothing to the credit cardholder. However, the reason why some businesses reject American Express boils down to the fact that they are losing money with each transaction. When American Express cardholders pay, merchants have to pay between 3-5% in swipe fees. This is 1-3% higher than both Visa and MasterCard.
How American Express justifies their annual fee and higher swipe fee is with their rewards program. The annual fee and the higher swipe fees give the company the ability to give their cardholders great rewards. This in fact is why the company argues for its higher swipe fee. There is very these  cardholders cannot do with their points. The rewards range from travel to entertainment and experiences that can be paid off by accumulating the right amount of points.

Is it Right For You?

Whether or not using this card is beneficial or not depends on the lifestyle of the cardholder. With no international fees and excellent rewards, travelers and affluent shoppers frequently use American Express. This is not to say that American Express is exclusively for travelers and shoppers, but it is not a card for grocery shopping. In fact, American Express recently lost its longstanding relationship with Costco and a lawsuit that allowed merchants to discourage cardholders from using American Express despite being able to take it. American Express has made many efforts to improve its reputation with merchants, but as of now, it still stands as a card that may not be advantageous unless the cardholder shops at the select retailers where American Express is accepted.

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