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Amex made 19.2 billion – with a B – in merchant fees last year…

American Express has just won a landmark supreme court case regarding credit card competition, which challenged the credit card giant on a variety of levels. The question: can merchants encourage customers to pay via other cards, rather than Amex? The answer: no. While on the surface this isn’t revolutionary, the findings and opinions from the case are fascinating, at least by banking standards.

Merchants Charge More Because Of Amex

That’s right. Justice Stephen Breyer of the United States Supreme Court opined “Merchants generally spread the costs of credit-card acceptance across all their customers.” In other words, the places you spend money will often raise prices to account for the costs associated with taking Amex and other premium rewards credit cards. Historically, merchant fees charged by Amex have been higher than other card issuers to help fund their premium rewards program, which meant in one way or another, non Amex cardholders were subsidizing Amex cardholders – at least in Stephen Breyer and BuzzFeed’s opinion. And cash customers? Yeah they definitely suffer, and not just because they’re missing out on rewards from each purchase.

Amex Brought Better Rewards To Consumers

People love their points. In fact, it’s probably why you’re here. According to the case, American Express brought the rewards game to new levels, dragging Visa and Mastercard into the fray. Justice Clarence Thomas is of the opinion “Amex’s business model spurred Visa and Mastercard to offer new premium card categories with higher rewards, and Amex provisions do not prevent Visa, MasterCard, or Discover from competing against Amex by offering lower merchant fees or promoting their broader merchant acceptance.” In other words, nothing is stopping Visa, Mastercard or Discover from coming out with lucrative rewards schemes, and Amex has forced everyone to step up their game.

Amex Or Bust For Merchants

Historically American Express has charged much higher merchant fees than other card issuers, but for many businesses, not taking the card would cost far more. Amongst others, restaurants in particular have expressed the notion that not taking Amex would put them out of business, as savvy consumers aim to reward their lifestyle with the most points. No Amex, no dinner. American Express is reportedly lowering merchant fees this year, and argues now that their fees are in line with premium Visa and Mastercard rewards offerings, such as the Chase Sapphire Reserve or Citi Prestige. Hey, you can’t turn down 3X points on dining…

What’s your opinion of the U.S. credit card market?

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