Amex CEO Pushes Back on Credit Card Surcharges

American Express Chief Executive Officer Steve Squeri said adding surcharges on purchases made with American Express cards would be a bad thing for consumers. 

Squeri was speaking at the Goldman Sachs U.S. Financial Services Conference, Payments Dive reports. 

“What’s important for us is that our card members are not discriminated against,” he said. “I think surcharging in general is a bad customer experience.”

Even though Squeri is unable to prevent merchants from charging extra for purchases made with American Express credit cards, he still sees merchants charging customers more for using their cards as bad for consumers.

“Embed it in your prices if you want, but I think adding a surcharge is a really bad customer experience,” he said. 

In October, part of a proposed lawsuit settlement over excessive swipe fees resulted in Visa and Mastercard agreeing to end the “honor all cards” rule that requires merchants that accept one card tied to the Visa and Mastercard networks to accept all other cards tied to the networks as well. 

Without this rule, a merchant could turn down transactions from cards with higher fees such as premium cards or rewards cards. But because merchants don’t want to turn away wealthy customers from their businesses, they may add a surcharge instead. 

Amex was not involved in the litigation or settlement, but the settlement could force the Amex network to abandon its own similar rule.

Unlike Squeri, Ken Musante, President of Napa Payments and Consulting, sees possible surcharges as an opportunity for merchants. 

“This is a perfect opportunity for a point of sale provider to have a variable surcharge where the surcharge can be contingent upon the card that’s utilized,” Musante said.

“Your surcharge will be between 1 and 3%. It will be displayed on the receipt at the time of the transaction. And if it’s a high value rewards card, it might have a 3%. If it’s a lower value, it might have a 1.5%.”

Merchants already pay higher interchange rates for American Express transactions than they do for Visa and Mastercard credit card transactions. 

According to Bankrate, swipe fees for Visa are 1.15% to 2.40%. Swipe fees for Mastercard are 1.15% to 2.50%, and swipe fees for American Express are between 1.43% to 3.3%.

American Express plans to continue to add cardholders who spend more and don’t mind paying higher annual fees, according to Simply Wall Street. 

With this strategy, American Express expects to reach $85.7 billion in revenue and $13.5 billion in earnings by 2028, Simply Wall Street reports.

American Express is focusing on premium cardmembers, international growth, and younger, millennial and Gen Z cardmembers. These younger American Express cardmembers have strong spending growth and lower delinquency rates compared with industry averages, according to an analysis by Simply Wall Street. 

The American Express CEO sees charging consumers surcharges on credit card transactions as “bad” for consumers. American Express charges higher swipe fees than Visa and Mastercard and will continue with its policy of pursuing and serving customers who spend more on credit cards and are comfortable paying higher annual fees. 

At least one industry consultant views possible surcharges on credit card transactions, especially premium and rewards cards, as an opportunity for merchants to gain additional profits.