mikesyr18

One of my cash back cards, and main driver at the moment is the Bank of America Cash Rewards. It may seem like a low earning card, but the card itself is pretty straight forward, and the 10% bonus with no AF is nice. You're basically getting a 3.3% (gas and inside gas stations), 2.2% (groceries), and 1.1% (everything else) with the only obstacle being a $25 minimum (but you can redeem for $26.00 if you want to). No $25 at a time redemption or extra statement lag until I get my cash back.

With that said, I've been strongly eyeing the BoA Premium rewards... 1.5x on everything except dining and travel, and then 2x, with a $500 sign up bonus, TSA precheck reimbusement, and more.
The BoA CB card is more straight forward, has less hassles in redeeming, and a higher rewards rate (technically). I have no reason to use a Blue Cash. Perhaps AMEX should take at look at Bank of America's card and offer something that competes a little bit better with it. Perhaps AMEX could offer a 15% bonus on their cash back rewards if one redeems into their AMEX savings account or something, plus lose the statement lag and let people redeem for $26 or $31 if they want to, rather than only letting them redeem for $25.

bradpetrik

mikesyr18

I can understand the charge cards, because AMEX wants to make sure you pay the entire balance in full before you can redeem your rewards.

The revolvers on the other hand? No reason for it... You're right.

gooselee

But if your prior argument is that people are actively choosing other merchants specifically due to the fact that someone doesn't accept Amex, wouldn't those merchants want to start accepting Amex now and bring in those "typical Amex spenders"?

I get that you and I have different opinions or approaches to how we spend and use our credit cards, and that's fine. Can we at least agree that neither of us have the actual data that AMEX does, and thus neither one of us actually knows what they're thinking?

That said, my argument would be that the fact Amex chose to lower their rates is alone evidence that their data shows it will bring a net positive result. They could be wrong, of course, but they have more actual information than any of us posting on FT.

mikesyr18

I don't know about others, but I used an AMEX for a few reasons... One being that it cost the merchant more money. In return, I expect higher rewards given to me for those higher interchange fees, along with exceptional customer service, better benefits, an advantage when disputing, etc.

Once you take the higher interchange fees away, AMEX becomes just like any other issuers, so there's no reason to use them anymore. Interchange fees pay for protections, rewards, etc., and will probably go down in quality now that AMEX is slashing them by nearly 30% [from 3% to 2.37%] or so for everyone.

People used to use AMEX because they knew if there was a problem with the purchased item(s), they could return it or get their money back no matter what, even if the merchant tried to input a stupid loophole to cover themselves. I value protections even more than rewards (although that's #2 ). Visa and MasterCard would (and still do) more often than not, side with the merchant unless downright fraud takes place, and the cardholder can dispute it and file a police report, etc.

I think AMEX should stop being like McDonalds are start thinking about quality rather than quantity, which may mean go back to the basics and offer just charge cards again. Raise the annual fee on the charge cards, up the rewards significantly, increase the benefits, re-vamp the customer service, and keep the interchange fees the same. AMEX needs to offer a product the other networks don't -- not offer something that can barely compete and play the game of "catch up." I think over the years people began to become tiresome of the constant erosion of AMEX advantages when compared to V/MC, so the loyalty is lost... They should earn loyalty again by doing what they did before.

kyanar

There are no processors in an Amex transaction. Amex is sole acquirer, so apart from per transaction costs imposed by gateways (such as Authorize.net, etc) there is no-one else to take any of the transaction.

Everything you just said is hogswash. For a start, it's the merchant being charged that 3% or whatever, not you, so in theory you should actually get less from Amex than the merchant does, including unfavourable dispute terms, worse customer service, and crappier benefits.

Second, if they reduce their merchant fee by 30% (it's not interchange, there's no network switching happening) but increase their merchant acceptance by 40%, they're actually net benefiting.

Third, they're not exactly competing with Visa/MC. The merchant fee on an Amex Green card is still 2.37%. The interchange on a MasterCard World Elite is not a whole lot more than that, but the MasterCard standard is a heck of a lot less. Amex is still making out like a bandit on the average transaction.

tmiw

They may make most of their money from interest, but I suspect that card benefits/rewards would be not as plentiful as they are now (assuming they even continue to exist) if the US were to ever cap credit card interchange.

On that note, I think AmEx's interchange decrease has been inevitable for quite a while. It's hard to justify US merchants paying close to 3% when merchants in other countries pay less (sometimes by a significant amount). Of course, a lot of that is due to laws capping them, but still.

mikesyr18

No duh.

That's not the history of the AMEX business model, sorry. That is why AMEX used to have a very loyal following of high spenders. If you're saying the reduced merchant fees will have those results, I've pointed that out many times already.

Again, missing the point. Since AMEX is already accepted at 65ish percentage of merchants, adding 30% more merchant acceptance won't matter that much if you're reducing your revenue significantly from the other 65%.

Actually they are. Chase has been eating AMEX's lunch, and other banks have started to turn up the stove heat to a pretty high level on AMEX's behind. The whole point of needing additional acceptance is to compete with Visa and MasterCard. If a merchant doesn't take AMEX, there's no competition at that store/merchant. There's no "merchant fee" for the Green Card. The store's vendor negotiates a lower price if the merchant does enough transaction volume. And nobody applies for an AMEX and expects a high acceptance rate at merchants... Only a fool does that.

But again, you came here to destroy a civil discussion, so if you expect me to carry on a conversation with you, you might not want to use the words "hogwash" and "first of all," next time.

krazykanuck

I mean at the end of the day publicly traded companies are chasing earnings and revenue growth and Amex probably started to run out of high spenders and the high earners, hence the march down market, and the later ill fated attempt to enter the unbanked/underbanked market with the Bluebird and Serve prepaid cards. It's basically starting from the opposite of Chase, which had good success in the low to mid market (Slate, Freedom, CSP, and the co-brand cards) and it looking to move upward with the launch of the CSR.

How so? Do you have any actual financial metrics that back that up?

kyanar

No, I'm not saying that it will have that effect. I'm saying since it's the merchant being charged, not you, your logic is flawed since you're basically saying since they charge someone else more, they should give you better service and that reducing the amount they charge someone else will give you worse service. This doesn't logically follow. At all.

But Amex isn't accepted at 65% of merchants. Not by a long shot. I found it ironic that travelling in the US, Amex acceptance was worse than Australia. And the reason for that is likely due to the much higher merchant rate charged to merchants. Here, Amex has an absolutely rabid following of customers, and a very healthy acceptance rate. With a much lower merchant fee (as long as you pinky swear promise not to surcharge more than you do Visa or MasterCard). This is doubly so with small businesses, where Amex charges easily half the merchant fee as they do in the US (1.5%) - and yet not a single devaluation of MR or customer service in sight.



What are you talking about? Of course there's a merchant fee - they're not going to give you 0%.

No, the foolish thing is expecting a publicly traded company to pass up revenue/profit. Amex does indeed benefit from their brand recognition, and their premium brand perception, but they also target high spenders. You can't be a high spender if you can't spend (and, in case you weren't aware, Amex has actually declared an intent to match Visa/MC card acceptance by the end of FY19 - that's not going to be an easy goal if they intend to charge 3% per txn).

Ah yes, accusing those of disagreeing with you of coming here to destroy the discussion is totally civil. Pot, kettle, black.

bradpetrik

The thing is Amex has tried this before with OptBlue. It didn’t work.

gooselee

This is a lot of words. None of them actually answer the question.

As a business, Amex needs to compete in today's market. Not some historical time.

You are correct that AMEX needs additional acceptance to compete. Again, that's the entire point.

You're also correct that AMEX has a reputation for lower acceptance. Perhaps they want to change that so more people apply for and use their cards.

+1

Amex is running a business. They seem to have decided a while ago that they can be more successful if they target a broader portion of today's population with a wider variety of products and options. I guess this is disappointing to people longing for the good ol' days when their fancy green Amex was a point of dinner conversation or something, but apparently Amex has decided they're okay if those people decide Amex is no longer for them.

mia

The Flyertalk article is incomplete. American Express has lowered its average discount rate (interchange) each year for a long while. Read their annual reports:

2017 = 2.43%
2016 = 2.45%
2015 = 2.46%
2014 = 2.48%

The average rate hasn't been 3% in recent memory. The planned reduction to 2.37% is a faster decline, but this isn't a fundamentally new strategy -and- it isn't risky. American Express already understands the tradeoff between price and volume. What's really new is that they are touting it to investors in advance, rather than just doing it, and this seems to have paid off with some free press coverage and internet chatter.

bigbuy

Interesting numbers.
I owned a retail business for 30 years. The average yearly volume during about the last decade of ownership was 4 million dollars. About the last 10 years or so of ownership I took Amex cards. Shortly after I started taking their cards in in the mid 1990's, Amex offered me a 1/2 percent reduction in the fee (2.2% instead of 2.7%) if I agreed to let them hold my money for 30 days instead of the normal 3 days. I accepted. At the time, Visa and Master Card charged me 1.43% and Discover was less.
Here are the numbers rounded to dollars that have stuck in my brain since selling the business. I can't remember the pennies.
Average cash transaction - $11
Average check transaction - $14
Average Discover transaction - $17
Average Master Card transaction - $23
Average Visa transaction- $26
Average AMEX transaction - $31
I was in an extremely low margin business, but gladly took Amex for the extra revenue

notquiteaff