By sean

Unlike Visa and Mastercard, who publish their discount rates (known as interchange fees), American Express does not.  However the American Express 2007 Annual Report reveals that, on average, Amex’s discount rate was 2.56% (2007), 2.57% (2006) and 2.58% (2005).  That is about 0.77% higher than the average Visa interchange rate, which is 1.79%. However, that average includes the much lower rates that American Express charges some very large companies.  For example, the book Paying With Plastic (P.196), describes the sweetheart deal between American Express and Costco.

In 1999, American Express and Costco…announced that they would be partnering to offer American Express consumer and corporate charge cards that also functioned as Costco membership cards…as a result of the partnership, American Express became the only payment card to be accepted at Costco, which had only accepted Discover for the previous eight years.  Industry estimates suggested that the merchant discount paid by Costco to American Express was as low as 1.1 percent.

Small stores more typically will pay a 3.25% – 3.75% discount.

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Image thanks to http://www.flickr.com/photos/28473961@N02/2720590720/

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