Do Small Businesses Love to Hate American Express? | CreditShout

Do Small Businesses Love to Hate American Express?

By Dan Rafter / November 8, 2010


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Sometimes it seems as if small business owners hate American Express.

At least it must seem that way to consumers. How else can they explain why so many small businesses refuse to accept their American Express cards?

There is a rational reason, of course, why some businesses don’t take American Express. It costs them more. Business owners have to pay one or more percentage points more in fees when they accept swipes from American Express cards than they do when their customers pay with Visa or MasterCard.

For business owners, not accepting American Express cards can save them significant money during the course of a year.

However, as financial columnist Jay Goltz, writing for the New York Times, explains, business owners might actually be hurting themselves when they try to save money by banning American Express cards.

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Forbidding American Express a Bad Move?

It’s true that the business owner will immediately save money on fees by forbidding American Express. But what will the business owner lose in terms of future business? By refusing to allow customers to use their American Express cards, business owners might keep those customers from returning.

And you can bet that those future lost sales will easily outweigh the savings in swipe fees.

As Goltz points out, customers are notoriously fickle. They’ll switch their allegiances from one business to the next at the slightest nudge. Not being able to use a favored credit card is often nudge enough.

Remember, customers pick the particular credit cards they are using for a reason. Maybe their American Express card comes with a lucrative rewards program. Customers might want to rack up their rewards points. If they can’t do this while patronizing your store, they’ll do it at another. Other customers might not have additional credit cards. They certainly won’t be coming back. Others might have racked up too much debt on one credit card, and have no choice but to use their American Express card. Again, you’ll be turning away potential business if you don’t let these customers swipe their American Express cards.

Staying Open for Business in Tough Times

And in today’s economy, small business owners can’t afford to do anything that will turn off customers. Small businesses are shutting their doors at an alarming rate. This isn’t surprising: Housing foreclosures are soaring. Unemployment remains above 9.5 percent. Home values are falling. Consumer confidence is down. Potential customers aren’t spending as freely as they once were. They’re holding onto as many of their dollars as possible.

Small business owners, then, face a difficult decision. They need to save as many of their own dollars as they can to survive today’s challenging economic climate. But saving money by banning American Express cards might end up costing them even bigger dollars in the long run. The verdict? It makes sense for small business owners to let their consumers swipe whichever card they prefer. Entrepreneurs can then find their savings elsewhere.

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