Here's Why Your Business Needs to Accept American Express

If you're setting up payment processing for your small business, you may have learned something every business owner eventually discovers. American Express tends to take a bigger cut of each transaction.

Average processing fees are generally about 0.60 to 0.90 percentage points higher for American Express cards. That's based on credit card processing fee data gathered by The Motley Fool Ascent.

Some business owners don't accept American Express for this reason. That can be a costly mistake. While no one likes paying more in fees, it's worth it in this situation.

Why your small business should accept American Express cards

American Express cards may cost you more in fees. But American Express cardholders also spend more money. The card issuer has traditionally served a wealthier target market than Visa, Mastercard, and Discover.

We're not talking about a few dollars, either. Here's the average credit card transaction amount by payment network:

• American Express: $150
• Mastercard: $94
• Visa: $91
• Discover: $58

Those are significant differences. The average with American Express is 60% more than second-place Mastercard, and a whopping 159% more than Discover. That kind of higher spending is well worth paying an extra $1 in fees.

Fortunately, just about all the notable payment processors allow you to accept American Express. If you're looking for one, here's how to get started.

Setting up payment processing for your small business

Getting your business ready to accept credit cards can feel like a daunting task. While it takes some time to compare your options and set up everything, it's not too difficult. Here's how to accept credit card payments with your small business:

• Open a business bank account. Look for one with no monthly fees. You may want to start by seeing what your current bank offers. Or, check out The Ascent's list of the best business checking accounts.
• Figure out what type of payment processing you need. Some payment processors are primarily for online businesses. Others are great for point-of-sale (POS) systems you can use for in-person transactions. Think about whether your business will sell online, in-person, or both.
• Choose a payment processor. Set up an account with a processor you like. Once you've done that and connected it to your business bank account, you can start accepting credit cards.

Finding a payment processor could be what takes the longest, because there are quite a few available. Make sure to compare fees, plans, and hardware costs (if you need a POS system). You could also check if your bank offers payment processing.

Here are a few of the more popular payment processing solutions:

• Square is an affordable, entry-level option known for its POS systems. Its hardware and software are both user-friendly. It also has a simple fee structure: 2.6% plus $0.10 of each transaction with Square Point of Sale.
• Stripe Payments is a reliable payment processing software that primarily serves online businesses. You can use it to accept payments from around the world. Its standard rate is 2.9% plus $0.30 for domestic card payments.
• Clover POS offers multiple point-of-sale systems and primarily serves restaurants. Startup costs are on the high side, but it's easy to use and offers apps you can customize to fit your needs. Its plan for businesses with under $50,000 in transactions a year is Register Lite, which costs $14 a month and has fees of $0.10 per transaction plus 2.7% of in-person sales and 3.5% of keyed-in sales.

Payment processing is an important part of building a successful small business. Spend some time finding a processor you like, and make sure to accept cards from every payment network. Customers like having options, and it could lead to more sales for your business.