American Express has traditionally been accepted by fewer merchants than Visa and MasterCard. In the last few years, American Express has aggressively expanded its merchant locations, and in January 2020 AmEx executives claimed that the Company had reached “virtual parity” with Visa and MasterCard coverage in the US. You should be able to use an American Express card almost anywhere that you can use any credit card. American Express still lags in some international markets, so if you’re traveling abroad or if you often rely on your credit card you may wish to have another card as a backup.
Why Was American Express Once Accepted by Fewer Merchants Than Other Cards?
American Express offers a wide range of credit cards, many with low costs and attractive benefits. Still, for many years acceptance of American Express cards lagged well behind market leaders Visa and MasterCard in merchant acceptance. This occurred mainly because American Express used to charge significantly higher fees to merchants who accepted American Express cards. There were several reasons for those higher fees:
- Several American Express products are charge cards that must be paid in full every month. These cards do not produce revenue for the company through annual interest.
- American Express cards also offer generous rewards and relatively low interest rates and fees.
Since American Express’s business model essentially cut out revenue from interest, the company charged merchants to make up the difference. Some merchants were put off by the higher fees and chose not to accept American Express cards.
American Express also had the reputation of catering to a premium market: American Express cardholders have much higher annual purchasing, income, and average purchase size than users of other cards. Some merchants were willing to pay higher fees to reach that market, but many small businesses decided that it wasn’t the market they were after and stayed away.
As a result, as recently as 2014 American Express was accepted by 6 million US merchants, as opposed to 9.5 million for Visa and Mastercard and 9.3 for Discover.
How Did American Express Catch Up?
In 2015 American Express began an aggressive effort to expand its merchant base, focusing particularly on small businesses. They cut merchant fees and invested in anti-fraud software and business-friendly features.
American Express claims to have added 2.5 million new US merchants in 2017 and 2018 and another million in 2019, and the Company now states that their total merchant acceptance is at essentially the same level as their major competitors.
American Express is now widely accepted by major businesses across the US. You may still find some smaller independent businesses that do not accept American Express, but the concerns about merchant acceptance that prevailed up to a few years ago appear to have been largely resolved.
What About International Acceptance?
American Express still lags behind Visa and Mastercard in international acceptance, though the Company is working to expand its international presence. American Express is widely accepted in major markets but may not be in countries with a lower American business and tourism presence.
American Express cards were accepted in 160 countries as of 2018, as opposed to 185 for Discover and 200+ for Visa and Mastercard. Remember that even in a country where a card company has a presence, not all merchants will accept all cards. In some countries, especially developing countries, credit cards are not widely used.
If you will be traveling extensively you should check on the preferred cards in the countries you intend to visit. You may wish to bring a backup card from a different network to expand your coverage.
Is Coverage a Major Concern for American Express Cardholders?
American Express once lagged significantly behind Visa and MasterCard in merchant acceptance. That gap has been largely closed, but a reputation is a hard thing to change, and many customers still believe that American Express cards are not widely accepted, especially by smaller businesses.
If you see an American Express card that meets your needs and offers the features you want, you probably won‘t need to worry too much about acceptance: you’ll be able to use it at most online and physical merchant locations that accept credit cards.
If you travel internationally, if you often depend entirely on credit cards, or if you often patronize small businesses outside major metropolitan areas it may be a good idea to keep a MasterCard or Visa card as a backup.