Sunday, August 01, 2010

PayPal and American Express (AMEX)

The Redlich Law Firm no longer accepts American Express through PayPal.

I logged into my PayPal account today. There was a notice that, going forward, AMEX transactions will require a higher fee of 3.5% of the transaction, plus 30 cents per transaction.

We currently pay 2.2% of the transaction plus 30 cents, so on a $1000 fee, we pay $22.30. If we agreed to the 3.5% rate, we would be paying $35.30.

We think most of our clients pay with Visa or MasterCard. Most of our payments are through our website and we can't see what kind of card they use. But for our over-the-phone payments, we hear the type of card as we enter it.

We do get some AMEX transactions, but not that many. And I suspect most American Express cardholders also have a Visa or MasterCard.

I'm stunned at the attempt to grab so much more money from PayPal sellers. If it had been an extra 0.2%, maybe I would have swallowed hard and agreed. But the extra 1.3% works out to a greater than 50% increase in cost of this service.

This will make it easier to throw out the American Express card offers I get in the mail all the time.


FactFinding said...

We can have a big debate regarding interchange and merchant fees, however I am wondering what American express intends to do, nearly everybody who carries an american express card also carries mastercard or visa and possibly discover.

American express is geared for many higher spending consumers who many want the points or for corporation account spending. However, for many years banks were not allowed to issue american express cards until an antitrust settlement with visa and mastercard, hence at all times throughout history a backup visa or mastercard would be carried since american express needed not to be accepted by merchants especially with limited market share and of course american express target clients.

I would assume that this would be a horrible move on american expresses part because many clients who would want to use them would be able to do so via paypal and google checkout along with discover.

Of course one can only take american express and not take visa or mastercard but that would miss the many people that don't have american express.

I wonder how they stay in business. I am wondering if your law firm usually takes checks since they cost less to process.

The law industry is unique I think because I think a cheque is written often, usually a person arrives in a lawyer's office not always beforehand but after an incident and there isn't always a payment terminal in the office and if payment is needed for an upcoming case or acceptance a cheque is written on the spot.

An office that isn't prominent won't always have a visa/mastercard logo on a front street level view, and expensive cases often exceed what a credit card would be used for.

How do you find this in the regular office lawyer who isn't part of a larger firm, that term may sound vague but a one person law firm in a office building without the fancy glass decals is not uncommon especially in large cities. Call it old fashioned but it is is still did not cease to exist.

Unknown said...

We do save a little money on checks, but you have to counter that with the hassle of preparing deposit slips, making copies, going to the bank and bookkeeping. Online payment is easier for us.

For larger fees the check has the advantage, but then again, if the client wants to pay with a credit card, at least we get paid. And we find credit card payments far less likely to bounce.

It is rare for clients to come to our office. Most are from out-of-town, find us on the web, and pay on the website or mail us a check. The important thing is making it convenient for the client. The differences on our end are trivial.

FactFinder said...

I do agree, however many merchants think they should have a right to surcharge or otherwise get a lower fee for a product in which they get the benefits. They ignore the fact that checks and cash do have costs.

Checks are declining however, do you plan to take electronic takes? I had no idea american express charges 3.5%, usually the average discount rate is 2.0-2.5% compared to visa and mastercard's 1.5-2%.

Is discover the same , I have no idea as paypal probably charges the same regardless of payment.

Unknown said...

We pay the same 2.2% for Mastercard, Visa and Discover, all via PayPal and Google Checkout. That's what we used to pay for AMEX. Now they want to increase to 3.5%? I don't think so.