The two largest credit card companies in the United States behind American Express are fighting fee battles with merchants where they have previously made millions in charges to accept their cards.
Visa and Mastercard charge a 1 percent foreign transaction fee, American Express charges 2 percent, and the companies issuing the cards can add fees of their own.
The transaction fee on American Express cards has reduced from over 2.23% in 2005 to current levels of around 2% and given the increasingly competitive landscape, the trend is expected to continue well into the future.
American Express charges merchants a higher fee on its card products at close to 2.25% compared to the industry average of 1.9% of the billed amount since American Express customers tend to be higher income and higher spending consumers on average.
American Express cardholders have faced a 2% fee since mid-1999.
Visa, MasterCard, or American Express charges your bank a 1% fee for the service of converting the foreign currency, and then your bank will likely add on a mark-up of another 1-2% for facilitating this transaction.
American Express cards command a much higher average fee of about 2.2% compared to the competitors at around 1.5% since it brings higher spending customers with an average spending per card member 2-4x that of the competitors.
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For American Express cards, it charges 3 percent plus the 15 cent fee.
In order to maintain and attract high-income consumers, American Express offers higher promotions and membership rewards, which again are afforded only by the higher fee.
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Since American Express brings higher spending consumers to merchants, it can charge a higher commission (known as the interchange fee) on sales.
The transaction fee (also known as the discount fee) is the commission charged to merchants as a percentage of the dollar value of transaction on American Express cards.
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