American Express: history, advantages and disadvantages

American Express is an American company that provides financial, travel and payment services. It is best known for its American Express credit cards, or Amex. The company was founded in 1850 as a delivery service and later expanded into the financial market.

American Express competes with Visa and Mastercard. In the source material the company ranked third in the world ranking of credit cards.

History of American Express

The history of American Express began in 1850, when Henry Wells, William Fargo and John Butterfield founded an express delivery company.

Handling and transporting customers’ valuables required security and trust. These principles later became an important part of the brand.

In the late 19th century American Express began to offer financial products, including money transfers and traveler’s checks.

Later the company entered the travel market to serve customers who used traveler’s checks and increasingly travelled abroad.

The first American Express card, intended for business travelers, was issued in 1958.

Historically the brand was associated with wealthy customers. Over time the company widened its offering by adding cashback programs, Air Miles accumulation and additional services for cardholders.

How American Express differs from Visa and Mastercard

Most everyday financial operations go through banks. Between the sender’s and the recipient’s banks, payment networks operate and make transaction processing possible.

Among the largest such networks are Visa and Mastercard.

Visa and Mastercard process payments, but usually do not issue debit and credit cards themselves. That is done by banks and other financial organizations.

American Express uses a somewhat different model: the company issues its own cards and processes payments.

Interest and fees may be charged for servicing cards. Merchants also pay for transaction processing.

The source material gave the following fees:

• Visa and Mastercard — from 1.5 to 2.5% per transaction.
• American Express — from 2.5 to 3.5% per transaction.

The higher cost of payment processing may be one of the reasons why some sellers, especially small businesses, do not accept Amex.

Advantages and disadvantages of American Express

Advantages

One of the strengths of American Express is considered to be its rewards and incentive programs for cardholders.

The company offers various bonus mechanics, including cashback, miles and additional services.

The source material also mentioned four cards with no annual fee. Such offers make the company’s products more accessible to a wider audience.

Disadvantages

American Express cards also have limitations:

• Some merchants do not accept Amex because of the cost of payment processing.
• Some attractive offers and rewards may be available only to new customers.
• Bonus terms sometimes apply for a limited time, after which the card returns to the standard terms of service.
• Some cards have annual fees and interest rates that may turn out to be unfavorable for the cardholder.

So when choosing American Express, consider not only the bonus programs but also the cost of service, the terms of reward accrual and whether the card can be used at the places you need.