Can my small business afford to stop accepting AmEx?


Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question for the expert Dear Your Business Credit,
Do American Express cardholders typically have a Visa or MasterCard card, too? I am going to stop taking AmEx cards because of the high cost, but want to be sure my customers have an alternative. Use of debit cards has spiked and the costs are very reasonable. -- William

Answer for the expert Dear William,
Customers' payment preferences are evolving constantly, so it's important to periodically examine whether the options you're offering are the right ones. It helps to look at the numbers and weigh the costs.

I could not locate any research on whether American Express cardholders typically hold a Visa or MasterCard, too. But the average American cardholder held 3.7 credit cards in 2009, according to a paper by the Federal Reserve Bank of Boston. Another Fed study found that nearly 33 percent of American families held four or more cards in 2010. That means it's likely that many of your customers will have options other than AmEx, but it's important to pay attention to their habits at your particular business over several months. If a very large percentage use AmEx, you may want to proceed slowly on dropping the card.

Think also about whether your customers are big spenders or average Joes. In general, far fewer Americans have AmEx cards than Visa or MasterCard, but each AmEx customer spends a lot more on that card.

It is possible that, even if you offer other options, AmEx loyalists will grumble. American Express scores high on customer satisfaction -- it's topped the J.D. Power and Associates ratings for seven years in a row

That said, you did mention that many consumers are now using debit cards, which may be just the alternative your customers need. Whether they're cheaper for you depends on the value of your typical transaction, and on how much banks charge you for debit card transactions. Banks have been charging merchants 21 cents per transaction. But a federal court in late July overturned the rule that allowed that fee, suggesting it should be capped at 12 cents per transaction. In comparison, credit card swipe fees average 2 percent, according to the National Retail Federation.

As you note, debit card use is on the rise. It increased 39 percent in the five years leading up to 2012, while use of online payment options rose by 30 percent, according to 2012 research by American Express. At the same time, the use of credit cards has declined a bit. The Federal Reserve found in its 2010 research that 68 percent of families had credit cards, down from 72.9 percent in 2007. 

Often, consumers' use of debit cards depends on the type of business they are patronizing, so looking at payment trends in your field may help you predict if your customers will switch over to them. The 2010 ComScore Online Credit Card Report found that more consumers prefer buying groceries and making drugstore purchases with debit cards than credit cards. However, for business expenses, travel, gas and automotive, merchandise and entertainment, more consumers liked to use credit cards. If you're in an industry such as travel, where customers feel better about making purchases on a credit card, it may put you at a disadvantage to weed out any major credit card.

The age of your customers may also make a difference in how they react to the absence of a particular credit card. Research by credit score provider FICO found that Millennials are more likely than other generations to be credit-cardless -- so if you have a lot of young customers, they may not care much if you have dropped any one card.

In contrast, the smallest percentage of cardless customers is among people over 60. A 2011 study by the Federal Reserve Bank of Boston looked at 2008 data and concluded that credit card usage was highest for older, wealthier and more educated consumers.

American Express is a market leader in winning wealthy customers, so if that's your target market, you may want to talk with some of your best customers about what they would do if you drop AmEx. It all comes down to keeping your customers happy -- and, while research can guide you, they know best what payment methods they prefer.

See related: Which credit cards should your small business accept?, Should we charge our customers to use credit cards?, Swipe fee battle renewed after court ruling

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Published: August 26, 2013

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