“We don’t take Amex” is costing you more than Amex ever would

There are a handful of conversations I have had so many times that I can hear the other person’s half of it before they say it. This is one of them, and it is the one that frustrates me most, because the cost of getting it wrong is measured in revenue the business never finds out it lost.

It starts when a small business owner tells me which cards they accept. It ends, almost every time, with them defending a decision made on a number that somebody told them, that they have never checked, and that may well have been out of date before they heard it.

Usually the sentence is “we don’t take Amex.” Sometimes it is “the fees are a killer.” Occasionally it is a flat “it isn’t worth it.” Ask where the figure came from and you get a shrug, or a mate in the trade, or a processor’s salesperson from six years ago who had every reason to tell them exactly that.

The most expensive opinion in small business

Here is the thing that gets lost. Refusing a card is not a saving. It is a decision to turn away a customer who is standing in front of you holding money.

The fee only exists if the sale happens. If the sale does not happen you have not saved the percentage, you have lost the whole amount, plus whatever that person would have spent with you over the following five years, plus whoever they would have brought with them. In retail or online, not accepting every card your customers actually carry is costing you business. That is not an opinion, it is arithmetic, and it is the arithmetic almost nobody does.

It is worse than a straight trade, too, because the cards people choose to carry are not randomly distributed. The customer reaching for an Amex or a Diners Club card is very often the customer on expenses, or the one who does not look at the right hand side of the menu. That is the customer you are declining.

The restaurant, and the argument I lost for two years

I owned a restaurant. My partners were absolutely immovable on Amex. The charges were too high, everybody knew it, end of discussion. I had this argument more than once and I did not win it.

Then I actually went and looked, which is the entire moral of this post.

At that time, in the UK, Amex were running an offer for small businesses of one per cent on the first hundred thousand pounds of revenue put through their cards, charge cards and credit cards alike. One per cent. Not the number my partners were defending, and not close to it.

I want to be straight about that figure. I am quoting it from memory, from that period, and card rates move constantly. Do not take it as today’s number. Take it as the reason to go and check for yourself, which is the only thing in this post I actually want you to do.

What happened when we turned it on

We were turning over somewhere around five thousand pounds a week. We started accepting Amex, and then, crucially, we told people. We posted it on social media. We put the card stickers in the window. We emailed our existing database.

Within days, takings were up thirty per cent.

I will be honest about what that number is and is not, because I would rather you trusted the rest of this. That uplift was not Amex alone. It was accepting the card and telling three different audiences that we had, all in the same week. The card opened the door and the shouting about it got people through the door. If you take one and not the other you should not expect the same result.

But do the sum anyway. Thirty per cent on five thousand a week is fifteen hundred pounds a week. Annualised, that is comfortably into six figures of additional revenue. On the other side of the ledger, one per cent on a hundred thousand pounds is a thousand pounds. A thousand pounds of fees, against a step change in takings that we had been arguing ourselves out of for two years on the strength of something somebody once said in a pub.

That is why this one gets under my skin more than most.

Why the number in your head is probably wrong

There are a few reasons the received wisdom is so reliably out of date.

Rates are not one number. What you actually pay depends on the card type, whether it is debit or credit, consumer or commercial, domestic or international, present or not present. The “rate” you were quoted is an average across a mix of transactions that is not your mix.

Your average transaction value changes everything. A fixed pence-per-transaction charge is trivial on a hundred pound restaurant bill and brutal on a three pound coffee. Two businesses on the identical tariff can have completely different effective costs.

And the market has moved. Rates, providers and the small business offers sitting on top of them have all changed repeatedly over the last decade. A figure from 2015 tells you nothing useful today, and that is exactly the vintage of most of the figures I hear quoted at me.

Which leaves most owners negotiating blind. You cannot push back on a quote when you have no idea what the alternatives cost, and the person quoting you knows that perfectly well.

So I built the thing I kept describing

After enough of these conversations I got tired of sketching the same comparison on the back of something, so I wrote it as a tool. It is below, on this page, and it is free.

You tell it what you take by card each month and your average sale value. You set the mix of cards your customers actually pay with, across Visa, Mastercard, Amex, Diners Club, Discover, JCB and UnionPay. It works out what each provider would cost you per month and ranks them cheapest first. You can drop in the deal you are currently on and see where it sits against the rest, and if a quote in front of you differs from the default rate, you can edit the rate and watch the whole comparison move.

It also shows you which providers accept which cards, which is the part people forget until the terminal is already on the counter.

The point is not that the tool gives you a perfect answer. The point is that it gives you a number to walk into the negotiation with, instead of a feeling.

Before you pick up the phone

Use it in that order. Work out your real position first, then negotiate, then sign. Almost everybody does those in reverse and then wonders why the terms are poor.

Three things worth doing while you are at it. Ask every provider about small business or introductory rates rather than accepting the rate card, because those offers exist and they are rarely volunteered. Check your actual card mix from your own statements rather than guessing it, since that mix is what decides your effective cost. And whatever you end up accepting, tell people you accept it, because the card on the terminal earns you nothing if nobody knows it is there.

Do the research

That is really the whole message, and it is not just about cards.

Do the research. Do not believe what you heard. The most expensive decisions I see in small businesses are almost never made from bad data, they are made from no data at all, defended confidently, and left in place for years because nobody went back and checked whether it was still true.

I argued about Amex for two years and I was wrong for most of them, because I was arguing instead of looking. Go and look. And enjoy the app.