Amex CEO slams surcharges | Payments Dive

Increased merchant surcharges on purchases made with American Express credit cards would be “bad” for consumers, Amex’s CEO said at an investor conference last week.

American Express CEO Steve Squeri addressed the possibility of Amex cards facing more surcharges when he spoke Wednesday at the Goldman Sachs U.S. Financial Services Conference, after he was asked about it during an interview with a conference host.

The question came in the wake of a proposed lawsuit settlement by rival card networks Visa and Mastercard with merchants in October that could result in more surcharging by merchants when consumers present premium cards. Amex was not a party to the settlement.

As part of the pact to settle the class action over excessive swipe fees, Visa and Mastercard agreed to end a long-standing "honor all cards" rule. Some analysts predict that the rule’s end could mean surcharges for premium credit cards because merchants are unlikely to refuse purchases from wealthy shoppers.

Under the networks’ “honor all cards” rule, any merchant who chooses to accept a card tied to the Visa or Mastercard network must accept all cards tied to that network, regardless of which bank issued the card or how much interchange fee a card carries.

While Amex was not a part of the litigation or settlement, Squeri acknowledged that the settlement could pressure his network to drop its own “honor all cards” rule.

The CEO tried to pour cold water on the notion of surcharges Wednesday. “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.”

The credit card network generally charges higher interchange fees than Visa and Mastercard. American Express swipe fees average between 1.43% to 3.3% of a total transaction, according to Bankrate.

Visa and Mastercard charge average swipe fees of 1.15% to 2.6% of the transaction.

An end to the "honor all cards" rule is unlikely to result in merchants declining to accept expensive credit cards, and is more likely to result in a scaled surcharge in which customers using more expensive cards are subjected to extra costs at checkout, said Tony DeSanctis, an industry consultant for the firm Cornerstone Advisors.

The settlement could be negative for American Express because the card network has higher interchange fees than Visa and Mastercard, said Richard Crone, a San Francisco-based industry consultant.

The rewards attached to the company’s premium cards are what appeal to cardholders, and those rewards are funded through higher interchange fees, he noted.

“The merchants are [indirectly] funding those rewards and the merchants will be happy to charge a convenience fee,” he said. That means “the one who is really paying for all of this is the consumer.”

Squeri seemed to acknowledge that he couldn't stop merchants from charging extra for American Express cards. 

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

Squeri implied that Amex has a plan for the possibility that some of its cards might face higher customer fees, although he provided few specifics.

“We've been through this in Europe, we've been through this in Australia, we've got a lot of history and we know how to navigate these situations," he said. "We'll war game things out, and we'll see how it plays and we'll react."

A spokesperson for American Express did not respond to a request for additional details on Squeri's comments.