What Is an American Express Card?
An American Express card, also known as an “Amex” card, is an electronic payment card branded by the publicly traded financial services company American Express (AXP). The company issues and processes prepaid, charge, and credit cards. American Express cards are available to individuals, small businesses, and corporate consumers across the United States and around the world.
Key Takeaways
- American Express cards are issued by American Express—a publicly traded financial services company—and are charge cards, credit cards, or prepaid cards.
- An American Express card, also called an “Amex” card, can offer a variety of perks, including rewards points, cash back, and travel perks. Some cards are co-branded, such as those with Delta and Hilton.
- American Express is one of the few companies that issues cards and has a network to process card payments. Visa and Mastercard have processing networks but don’t issue cards.
Understanding American Express Cards
American Express cards are issued by American Express and processed on the American Express network. American Express is one of only a few financial service companies in the industry that has the capability to both issue and process electronic payment cards.
American Express is a publicly traded company in the financial services industry. It offers both credit lending and network processing services, giving it a broad range of competitors in the industry. As with traditional lenders, it has the capability to issue credit products, which it provides in the form of charge cards and credit cards.
American Express has its own processing network that competes with Mastercard (MA) and Visa (V). Its most comparable competitor is Discover Financial Services (DFS), which is also a publicly traded financial service company offering both credit lending and a processing service network. With multiproduct capabilities, American Express generates revenue from both interest-earning products and network processing transaction services.
The term “Black Card” refers to the American Express Centurion card, which is offered by invitation only.
American Express Fees
American Express generates a significant portion of its revenue from transaction processing. Many merchants accept American Express cards and are willing to pay the transaction fees associated with processing because of the advantages that come with offering American Express as a payment option to customers.
In an American Express transaction, the merchant’s acquiring bank communicates with American Express as both the processor and the issuing bank in the transaction process. Merchant acquiring banks must work with the American Express processing network to transmit communications in American Express transactions. American Express is also the issuer that authenticates and approves the transaction.
Merchants pay a small fee to American Express for its processing network services, which are part of the comprehensive fees involved with a single transaction. As both a processor and high-quality lender, American Express has built a strong reputation in the financial services industry.
Types of American Express Cards
As noted above, American Express credit cards and prepaid debit cards are offered to a variety of both retail and commercial customers. It is also an industry-leading provider of charge cards, which offer month-to-month credit with card balances that must be paid off each month.
American Express charge and credit cards follow standard underwriting procedures. The company seeks good- to high-credit quality borrowers—which means a credit score of at least 670—and generally is not a subprime lender.
American Express credit and charge cards come with a variety of benefits in the form of rewards points and travel perks, which depend, in part, on the annual fee charged. American Express cards may offer cash back on certain purchases, though they aren’t among the best cash back cards currently available. American Express also offers numerous branded prepaid debit cards, which can be used as gift cards or special-purpose reloadable payment cards.
Annual fees for American Express cards tend to run high: $95 for the Blue Cash Preferred Card, $99 for the Delta SkyMiles Gold American Express Card, $150 for the Green Card, $250 for the Gold Card, and $550 for the Platinum Card. That said, the Green, Gold, and Platinum cards have no predetermined spending limits. American Express does offer at least six cards with no annual fee. Customer service for all Amex cards is highly rated, with the company coming in No. 1 on J.D. Power’s 2020 U.S. Credit Card Satisfaction Study.
Partnerships, co-branded cards
American Express issues many of its cards directly to consumers, but it also has partnerships with other financial institutions. In the U.S., for example, Wells Fargo issued an American Express card (new applications were paused in April 2021, although this doesn’t affect current cardholders), and in Mexico, Banco Santander offers American Express cards. American Express also has partnerships with other companies to encourage consumers to apply for its credit cards. Two examples are its co-branded cards with Delta Air Lines, which allow consumers to earn frequent flier miles redeemable on Delta, and its Hilton Hotels co-branded cards.
Pros and Cons of an American Express Card
Pros
Green, Gold, and Platinum Amex cards don’t have any predetermined spending limits.
Amex is known for the high quality of its customer service, ranking number one in J.D. Power’s 2020 U.S. Credit Card Satisfaction Study.
Amex cards offer a host of rewards, perks, and cash back on purchases.
You must pay the balance on Amex charge cards in full each month, which prevents you from running up high interest charges.
Cons
Due to higher transaction fees than other cards, some merchants won’t accept Amex cards.
You can’t get an Amex card without at least a good (670 or higher) credit score.
Annual fees for Amex cards can be high.
You must pay the balance on Amex charge cards in full each month, so you can’t use them to “borrow” money.
