Posted by bobnone | Posted in Credit Card | Posted on 12-01-2010
Average Credit Card Merchant Fees ~~Financial Matters of Life ~~
American Express has some of the best rewards programs out there, Starwoods Membership Awards points for simple charge back.
To demonstrate why, we will analyze two operations Joe coffee shop, a card with American Express, and the other with your MasterCard / Visa by one of the largest issuers (Bank of America, Chase, Citibank, Capital One, Wachovia).
- Scenario 1: Pay with Amex
- Joe pays a rate of 2.4% ~ Compromise Amex, on average, to process the transaction. American Express owns the network, the card company, and sales network to register new stores, so keep the entire transaction fee.
- Scenario 2: You pay with your local bank MasterCard / Visa
- Joe pays a rate of ~ 1.4% on average to process the transaction
- This quota is divided three ways between: (i) sales organization signing Joe's Coffee using a MasterCard / Visa network (ii) MasterCard / Visa Network, and (iii) the bank that granted the credit card.
Not only American Express charges a fee higher transaction but also keep the full fee, instead of splitting it three ways.
The virtuous cycle goes like this – (i) American Express Cardholders have the most prestigious for them to charge merchants more, (ii) American Express charges merchants more so they can offer better rewards, (Iii) American Express offers a better reward so they can attract cardholders first. We believe this is precisely the reason why Warren Buffet owns 12% of the company. This is also why when you take an American Express credit card, you get to enjoy extra rewards at the expense of Joe Browns everywhere.
We ran some numbers and found that the following be no American Express cards rank well, based on our estimate of annual awards and promotions minus the annualized costs:
- The Amex Blue Cash pays 5% back on grocery and gas purchases and 1.5% on everything else after spending $ 6,500 in one year. Above average spenders, this can easily exceed a rate of 2% reward.
- The Amex Costco gains true card pays 3% back at restaurants and gas, 2% on travel, and 1% of everything else.
- The Amex Blue Sky is actually a 1.33% cash back card. You get 1 point for every $ 1 spent, and can offset the costs of travel on your credit card at a rate of 7,500 points for each $ 100. This is one of the prizes based higher rates available that we know.
smart spending, and best of luck
Stephanie Neruda
President, NerdWallet LLC
http://www.nerdwallet.com
NerdWallet is a credit card search and comparison site, and seeks to become the best source for unbiased credit card information. The company was founded by a financial industry veteran in the wake of the financial crisis in August 2009, and officially launched in March 2010. NerdWallet is privately held, and is based in New York, NY.
Bankcard Processing Low Rates on High Risk Processing
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