Why Some Merchants Don’t Accept Certain Credit Cards


Credit cards are an essential part of doing business for a lot of companies, but accepting them doesn’t always come cheap. Some businesses avoid accepting certain card types altogether.

When running an e-commerce business, though, accepting other payment types can get tricky. Credit cards run the world. So what should you do, as a business owner? Which cards should you accept? Which should you avoid?

There isn’t one single answer, but we can provide you with some of the more important details to guide you in making the best decision for your company.

The cost of accepting credit cards depends on the type of card.

The main reason you, as a business owner, might not accept certain credit cards is because they have higher fees, or interchange rates, than others.

Interchange rates are set by the issuing bank of each card and can vary widely. Here are the minimum interchange rates for some popular card networks:

  • Mastercard: 1.5%
  • AMEX: 2.3%
  • Visa: 1.4%
  • Discover: 1.55%

So why do some cards charge such high merchant fees? Usually it comes down to how financially responsible their consumers tend to be and how many rewards they expect for using their card—i.e., risk vs. reward.

As you can see, American Express charges far more as a base than the other available networks.

Rates vary depending on card type, even within a single card network.

For example, a Mastercard rewards card can be up to 3.75% or as low as 1.5% depending on what the consumer receives with the card. The more rewards a card provides (like flight miles, cash back, etc.), the more expensive the rate is.

This is one reason why American Express is often so expensive, because it almost always has a reward attached to the card. Also, Amex is considered a charge card, not a credit card. The cardholder is charged the full amount at the end of the month instead of low payments.

I know what you’re thinking: can a merchant deny transactions from a card type within a network? The answer is, sadly, no. There’s no way to discriminate between card types within the same network. So if your business accepts Mastercard, then you have to accept all Mastercard cards (even the pricier rewards credit cards).

Some businesses may not accept certain credit cards because they’re too small to qualify for acceptance from an associated company, such as American Express.

Smaller businesses can find themselves unable to accept cards from some providers because they don’t have the necessary equipment or volume to qualify for acceptance under the provider’s policies.

This is often the case with American Express cards. Sometimes, this involves risk evaluation, credit history, or—most likely—processing history.

Sticking with American Express credit cards, online businesses may not want to accept cards on this network because the network, itself, limits consumer credit card transaction amounts. By not accepting any Amex cards, they can avoid decline messages (and fees) and the loss of a sale if the customers doesn’t want to try another card.

The larger a business, the more likely it is able to absorb high credit card processing fees without passing them on to customers in the form of higher prices.

But many large retailers only accept certain cards because they’re able to negotiate lower transaction fees than what they’d need to pay if they accepted all major credit cards.

After all, merchants typically pay an average interchange fee (a swipe fee) of 1-3% of every purchase made with a card, so even a 0.5% difference adds up quickly when you’re talking about millions or billions of dollars worth of purchases each year.

Small businesses simply don’t have the negotiating power. Plus, they typically don’t want the annual fees that come with this credit card network. There will always be credit card fees, but smaller businesses feel the drawbacks while larger businesses where American Express accepted will feel the perks/initiatives.

Not all payment processors accept every card network.

The infrastructure behind accepting cards can be complicated and expensive. Payment processor contracts with networks and issuers.

Even though it’s the payment processor that actually handles the transaction, the credit card company itself has little say in whether or not a specific store accepts its card. That’s because stores don’t contract directly with card networks like Visa or Mastercard — they sign up with payment processors to provide them with the back-end equipment to process payments.

It’s these processors that contract directly with both card networks and individual banks to allow them to process their cards. Some processors only accept certain cards, while others have relationships with all of them.

In some cases, this may be because of a corporate decision: The processor might have decided it prefers working with one network over another due to price or availability of resources. Or it could be due to a lack of demand from merchants — if most merchants want support for Visa and Mastercard, then that will be the focus for the processor.

There are more payment options than credit cards.

The myths might have you believe that credit cards are the only payment option. Besides credit cards (or debit cards, which are governed by the same rules as credit cards), there are many other payment options:

  • PayPal, which processes online payments and is used on both e-commerce sites and in brick-and-mortar businesses
  • ACH, or Automated Clearing House transactions, which are processed in bulk at the end of each day
  • Cash (not too helpful for e-commerce stores, but it’s an option)
  • Other digital payment apps/mobile wallets like Venmo, Apple Pay, or Samsung Pay
  • Bitcoin and other cryptocurrencies

For some businesses and consumers, credit cards are the only form of payment that crosses their minds when it comes to payment options.

But for others, there is a world of different payment options out there that have their own benefits and drawbacks. These alternative methods of paying for products and services can open up a number of new doors for businesses eager to expand their customer base and increase profits.

The business of payments is constantly changing, with new technology being introduced at breakneck speeds in an effort to maintain customer satisfaction and keep up with the times.

But that isn’t always as easy as it seems, especially when it comes to certain pieces of technology. Some new developments in payment technology are making it difficult for businesses to keep up — or even accept certain forms of payment.

Gauging your customer’s purchasing habits will help you decide which cards to accept.

There are plenty of payment types out there, and you may find yourself overwhelmed by the number of choices. To make it easier to manage your payment types, you should focus on the ones that work best for your business.

Some payment types may be unusable for certain businesses. For example, a business whose customers are largely located in another country may not need Amex cards as an option because of its specificity.

Monitor consumer purchasing habits.

Some consumers will only use one credit card or bank account and won’t switch because they want to keep track of their spending and maintain a reward program points balance. By gauging how your customers pay, you can use that information to determine which payment types to deny and which to accept.

Research your competitors.

When deciding which types of payments to accept, it’s a good idea to look at what your competitors are doing. If they only accept cash and checks, then it may not make sense for you to offer credit card payments unless you offer something significantly different from your competitor that requires credit card acceptance. On the other hand, if your competitors are accepting all forms of payment, then it could be worthwhile for you to follow their lead. Just make sure that it makes sense for your business first

Get a payment gateway that gives you the freedom to choose.

As a small business owner, controlling your payment gateway should be one of your top priorities. Choosing which networks, payment types, and even setting limitations can help you avoid extraneous charges and boost sales.

Speak with our expert merchant account representatives here at DirectPayNet to get started.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.