Guide to Simplifying American Express Merchant Services
American Express, or Amex, has undergone a transformation in recent years, evolving from being less widely accepted by merchants to becoming a viable option. The perception of complexity and higher fees associated with Amex merchant account setups deterred many businesses, particularly start-ups and smaller companies. However, with recent changes, accepting American Express has become more accessible and beneficial for merchants.
Understanding American Express Dynamics
American Express operates on a closed network basis, distinguishing itself from open network providers like Visa and Mastercard. This closed network means that Amex serves as both the provider and the issuing bank. While this results in relatively higher rates, Amex makes separate processing arrangements with acquiring banks such as Global Payments and WorldPay, ensuring costs are controlled.
Ways to Accept American Express
Merchants often enquire about the optimal way to set up Amex processing. Two primary methods exist:
Directly through American Express:
Ideal for high-volume merchants, this involves a direct agreement between your business and Amex. Transactions are treated as a separate account, and charges come directly from Amex rather than your processing bank.
“OptBlue” through your merchant account provider:
Suited for smaller businesses, this method involves Amex offering a wholesale rate to the account provider, who, in turn, adds a slight markup for the business owner. This is often considered the easiest way to integrate Amex payments.
American Express Interchange Rates
Understanding merchant service rates can be challenging. For those opting for “OptBlue,” the interchange rate is crucial. Amex provides wholesale rates to the card processor, with the merchant incurring Interchange plus a slight markup. The specifics of fees and percentages vary based on business type.
American Express Merchant Discount Options
For those choosing the direct route, Amex offers two pricing structures:
Amex Discount Rate Plan:
Charges are based on a percentage of the authorised transaction, with the amount varying according to the industry and predicted monthly turnover.
Flat Fee Plan:
Merchants pay a set fee per transaction and a monthly cost, suitable for businesses with constant high transaction volumes throughout the year.
Once approved to process Amex payments, merchants receive an account number to seamlessly integrate Amex transactions alongside Visa and Mastercard payments.
American Express Merchant Cash Advance
In 2011, Amex introduced its Merchant Cash Advance facility, allowing business owners to borrow against future card transactions. This short-term borrowing option is particularly useful for seasonal businesses or those undergoing refurbishments. Repayments are based on an agreed percentage rate of payments received through the chip and pin terminal.
Merchant Advice Service – How We Help
Merchant Advice Service serves as a non-biased platform assisting business owners in card processing and business finance. From online services for American Express to face-to-face transactions, our team of unbiased experts offers free guidance. If you have questions, feel free to reach out.
Conclusion
American Express, known for its charge cards, credit card transactions, and unique merchant fees structure, has become an increasingly attractive option for businesses of all sizes. Understanding the dynamics of American Express card processing, including the differences in transaction fee structures and the flexibility of accepting American Express cards, is crucial for effective cash flow management.
Whether you’re a small enterprise considering accepting American Express credit cards or a larger entity exploring direct processing options, the decision can significantly impact your business bank account and credit card sales. The choice between the Amex Discount Rate Plan and the Flat Fee Plan should be made after careful consideration of your specific business needs.
Additionally, American Express offers like the Merchant Cash Advance can provide valuable financial support in the form of small business loans, allowing for greater flexibility and growth opportunities. It’s essential to consult with a credit card processor or financial expert to understand these options fully.
For businesses navigating these choices, Merchant Advice Service is here to help. Our team offers expert advice and support, ensuring that you make the most informed decisions about accepting Amex cards and managing your finances effectively.
