Americans spend $50 Billion on Credit Card Processing Fees every year!
American Express Credit Card
American Express cards typically cost businesses about 0.77% more than Visa, Mastercard and Discover cards. Unlike Visa and Mastercard,
where the rates for each transaction are set according to a set of rules called Interchange,
American Express negotiates their rates on a business-by-business basis, which results in some large retailers (Costco, Trader Joe's)
getting much lower rates than their smaller competitors. Check out this blog article for more information on
American Express Discount Rates.
When you use this Credit Card, the merchant pays a fee to process the transaction
Different fees apply in different scenarios. Here are some examples:
A pack of gum at a convenience store: $1.50
Credit Card Fees: $0.30
(20.2%)
Percent: 3.500%
Per-Item: $0.25
The average convenience store paid $52,064 last year in credit card processing fees (details) - 2.25 times the average earnings of such a store.
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $0.05 |
| Processing Company: | $0.25 |
A small convenience store is likely to have a lot of very small transactions. When you use this
credit card to buy a pack of gum, the purchase often qualifies as a "convenience purchase" transaction.
These transactions are charged with much lower per-item processing fees.
In this case, the store would pay only $0.25 per transaction,
with a 3.500% percentage-based fee.
Jill's Sandwich Shop: $7.00
Credit Card Fees: $0.45
(6.4%)
Percent: 3.500%
Per-Item: $0.20
A typical sandwich shop like a Jimmy Johns pays about $10,000 each year in credit card processing fees (details) - enough to pay a sandwichmaker for 4 months!
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $0.25 |
| Processing Company: | $0.20 |
Using your card to buy a sandwich at a restaurant will trigger an Interchange
fee rate of 3.500%,
with a per-item fee of $0.00. This rate is lower than the Standard
credit card rate, because restaurant businesses that swipe the customer's card can qualify
for a better rate.
For small transactions like this, the total $0.20
per-item fee is often more costly to the merchant than the percentage-based fee.
SuperCheese Pizza Delivery: $25.00
Credit Card Fees: $1.13
(4.5%)
Percent: 3.500%
Per-Item: $0.25
The average local pizzeria (not a big chain) pays
$11,213 each year in credit card processing fees (
details) - enough for a new delivery vehicle.
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $0.88 |
| Processing Company: | $0.25 |
When you order a Pizza for delivery, the pizzeria is charged an Interchange
rate of 3.500%,
with a per-item fee of $0.00. However, the processor markup raises
the overall fees that the merchant will pay by as much as 0.000%.
This is one of the higher rates, because the merchant does not have access to the card at the time of
the transaction. Orders placed over the phone are especially costly to the merchant if they
do not verify your address.
Tank of Gasoline at a fueling station: $30.00
Credit Card Fees: $1.25
(4.2%)
Percent: 3.500%
Per-Item: $0.20
The average gas station paid $52,064 last year in credit card processing fees (details) - 2.25 times the average earnings of such a store.
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $1.15 |
| Processing Company: | $0.10 |
Per-item processing fees are lower for transactions at automated fueling stations, because of
the large volume of transactions at service station relative to the transaction size.
A typical per-item fee when you swipe your card at a fueling station would be $0.20.
However, gas stations also pay approximately 3.500% in
percentage-based fees.
Books at Bookseller.com: $50.00
Credit Card Fees: $1.80
(3.6%)
Percent: 3.500%
Per-Item: $0.05
Online retailer bluenile.com paid $6,120,000 in credit card processing fees (details) in 2007.
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $1.75 |
| Processing Company: | $0.05 |
When you make a purchase online, the Interchange
fee rates are generally higher due to the risk of fraud.
Typical total rates for online retailers for a purchase of this type are 3.500%.
This rate assumes that the online retailer uses Address Verification (AVS), which
is a fraud-protection measure that qualifies the merchant for lower rates.
Groceries at your local Jewel/Osco: $100.00
Credit Card Fees: $3.65
(3.7%)
Percent: 3.500%
Per-Item: $0.15
If everyone used your Credit Card, an average grocery store (with $14M in revenue) might pay $511,000 in fees each year!
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $3.60 |
| Processing Company: | $0.05 |
Large Grocery chains are able to negotiate lower rates for their Credit Card Processing.
In addition, very large grocery stores qualify for "tiered pricing", in which they receive
discounted rates if the total transaction volume exceeds a certain threshold. Thus, the
percentage-based fee that a supermarket chain, like Jewel/Osco, might pay is approximately
3.500%.
Electricity Bill over the phone: $150.00
Credit Card Fees: $5.26
(3.5%)
Percent: 3.500%
Per-Item: $0.01
If everyone used your Credit Card,
Exelon might pay
$663,321,067 in fees each year!
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $5.25 |
| Processing Company: | $0.01 |
Public utilities often get special credit card processing rates, due to their large transaction
volume and government-protected status.
The utility company often only pays a flat per-item transaction fee and no percentage-based fees.
However, for this credit card, the utility would pay a rate of 3.500%,
with a per-item fee of $0.01.
Flight to California on BlueSky.com: $300.00
Credit Card Fees: $10.51
(3.5%)
Percent: 3.500%
Per-Item: $0.01
In 2007 Southwest Airlines paid $216,000,000 in credit card processing fees (details) - enough to buy 54 MILLION gallons of jet fuel.
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $10.50 |
| Processing Company: | $0.01 |
Airlines often get special pricing for Credit Card Processing.
Their rates tend to be slightly lower than retail rates.
Flatscreen TV at Electronics Depot: $800.00
Credit Card Fees: $28.11
(3.5%)
Percent: 3.500%
Per-Item: $0.11
If everyone used your Credit Card, Best Buy might pay $1,406,308,163 in fees each year!
More Info
Interchange Category: Transaction Fee
| Breakdown of Fees |
| Amex: | $28.10 |
| Processing Company: | $0.01 |
Retail stores such as BestBuy get lowered Interchange
rates, as long as they swipe your credit card in-person.
Typical total rates for a large purchase such as a new HD TV would be 3.500%.
For large purchases like this, the per-item fee is much less significant to the merchant than the percentage-based fee.
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