We just got a letter in the mail today, that American Express is requiring our business to maintain a rolling reserve on our American Express merchant account. This news came as a huge surprise since we have only had one Amex chargeback in the last two years, over thousands of Amex transactions.
As a business that uses a merchant account in addition to providing them, we like to experience everything from our customer's points of view, but this is definitely one of those situations that nobody wants to be in. Amex makes up about 25% of our transactions, and a reserve puts a marked dent in our income.
Anyway, if you've had a similar situation to this with Amex or another merchant account provider please share it. I would love to see if this is an isolated event or if Amex commonly places reserves on large ecommerce businesses with clean history.
June 19th, 2007
This is an off-topic post, but the incident was unique enough for me to blog about.
We received a package today from American Express. It was a large white box with no information on it at all.
Inside the box was a black case a little smaller than a briefcase, but weighing about 10 lbs. On the case it stated 'YOUR BUSINESS CENTURION CARD HAS ARRIVED'.
Inside the case was:
a single credit card.
The interesting thing about the Amex black card itself is that it is metal and not plastic. The entire card including the numbers is cast or milled from a sheet of metal. It weighs about double a normal credit card. I don't think any information is going to get rubbed off any time soon.
The elaborate packaging for such a small object sets a new standard in my book. I think everyone in the office came to look at how much material was used to package a single credit card.
It takes a rare product to justify the cost of packaging like this.
If you don't know about the American Express Centurion Card, I found a good article on Wikipedia: the black Amex card.
August 9th, 2006
American express is the 3rd most widely used credit card in the US. Depending on who your customers are, not accepting American Express may be a very poor business decision.
A typical retail business's credit card acceptance percentages will look something like:
Visa - 60%
MasterCard - 25%
American Express - 10%
Discover - 5%
10% for Amex is not a huge number, especially considering that the majority of Amex users also have a Visa or MasterCard. Amex is more expensive than Visa and MasterCard, and businesses often choose not to accept it.
When we look at businesses that sell in areas where there are a lot of business professionals, or they cater to other businesses (B2B), we see Amex percentage go up drastically. Amex has a very strong business card program that many businesses use. Something as simple as having a location near a major business center, can have a huge increase on the amount of people that want to pay with American Express.
For a moderately B2B company, the credit card usage looks more like:
Visa: 45%
MasterCard: 25%
American Express: 25%
Discover: 5%
True B2B companies will see a very large increase in Amex sales, and these can be as high as 50% or more.
Even though your customers may have a Visa or MasterCard, you may lose them as a customer if you don't accept Amex. Businesses that take their clients out want to pay with their business card. The same thing goes for purchasing office supplies, equipment, computers, paper, food, or anything else that could be considered a business related expense. If you don't take Amex, the people wanting to use their Amex business card will find someone else who does.
Turning down sales because they cost a little bit more, doesn't save money because those people are no longer spending money with you.
August 1st, 2006
