In this blog, we will discuss the topic that is “How does American Express make money”, We will also look into what American Express is, the different operations of American Express, and most importantly how American express makes money. If you are interested in the topic then keep on reading.

How Does American Express Make Money?

American Express makes money by three key segments. The Global Consumer Services Group, the Global Commercial Services Group, and the Global Merchant and Network Services Group are composed of these entities (GMNS). Cardholders and merchant partners are the company’s primary income streams. American Express intends to increase the number of transactions completed with its credit cards in the near future by using a “spend-centric” strategy that emphasizes distinctive incentives and low fees.

Additionally, American Express earns money through fees and interest on outstanding amounts, as well as from the use of its credit and debit cards. Despite this, the majority of the company’s revenue comes from discount money collected from purchases made at partner stores worldwide.

·       Earnings from transactions with partner merchants account for a significant portion of American Express’s entire income stream.

·       The firm generates money via yearly dues, interest on existing amounts, conversion fees, and other sources of revenue.

·       American Express intends to increase the number of transactions completed with its credit cards in the near future by using a “spend-centric” strategy that emphasizes distinctive incentives and low fees.

What is American Express?

The American Express Company, which has been awarding freebies for almost 60 years, is being commended for its generosity, which is unsurprising (AXP). American Express, one of the world’s largest credit card businesses, earns money through cardholder transactions as well as yearly membership fees and interest. Numerous other organizations do not provide as varied a selection of incentives as Expedia does, and this is one of the reasons. These awards may include complimentary airline tickets, complimentary hotel upgrades, and complimentary theme park access, among others.

Unlike a digital behemoth, American Express, on the other hand, does not save your personal information in an intrusive and all-encompassing database, as the majority of other credit card companies do. In 2020, the organization generated $36.1 billion in revenue and made $3.1 billion in net profits, which may seem unlikely considering the organization’s charitable activities, yet it happened.

American Express was founded in 1850 and has been a freight forwarder and postal service provider for over a century. Later on, the firm started selling money order services, becoming the world’s first to do so. It started providing charge cards in the 1950s and has evolved to become one of the world’s most recognizable credit card businesses, according to Forbes. Additionally, to credit cards, American Express provides a comprehensive range of online services.

What does American Express do?

When American Express introduced their credit card to the general public in the 1950s, it revolutionized the industry. As a pioneer in the field, it swiftly built a strong brand identity and quickly gained market dominance.

Due to the fact that American Express serves affluent clientele, it is able to charge merchants fees that are far greater than those paid by rivals. Customers in the retail credit industry may now pick from a comprehensive range of American Express-provided digital financial products and services, including charge card services.

Three major divisions are used by American Express to manage company operations.

·       Global Consumer Services Group (GCSG).

·       Global Commercial Services (GCS).

·       Global Merchant and Network Services (GMNS).

The firm’s key income sources are merchants and cardholders. Along with merchant fees, which American Express refers to as “discount revenues,” the company also collects income from cardholders, which includes fees on outstanding credit balances as well as charges associated with card and conversion transactions, which the company refers to as “transaction fees.”

Merchant transactions provide for the lion’s share of American Express’ revenue in the United States. Merchant costs are much greater than what Mastercard and Visa charge. As a result of these limitations, many small companies and mom-and-pop stores refuse to accept American Express as a method of payment for their products and services. As a result, the company provides a varied range of customer incentives programmes, including cashback, vacation, and even admission passes to amusement parks and other attractions.

How American Express makes money

American Express earns money by charging consumers for transactions made via its wide network of merchants. Along with yearly membership dues and interest on existing credit balances, the organization gets money from cards in a variety of ways, including conversion fees.

American Express cardholder revenue

Amex’s wide network includes tens of millions of consumer, business, and corporate credit cards. Late fees and interest on outstanding accounts are two of the most lucrative income streams for credit card issuers, accounting for almost half of total revenue. AmEx has over 114 million cards in the revolving credit market and annually charges its customers’ accounts $1.2 trillion.

To improve its bottom line, American Express focuses on acquiring higher-quality customers who spend more than their Visa and Mastercard peers. Initially, the corporation offered no-interest credit cards, but cardholders were obliged to pay their monthly charges on time.

If the cardholder does not pay their bill, a collection agency is notified, and the account is canceled. Amex needed to reinvent its business model in order to stay competitive in the fast-growing consumer credit market.

Amex has a strategy that is unique among credit card issuers. Visa and Mastercard cardholders are not obliged to pay a membership fee; however, American Express charges a one-time fee to join one of its several reward programs. The Centurion card is offered with a fee of between $550 and $2,500. Other income streams for Amex include late fees and currency conversion services provided to consumers.

American Express has issued a variety of co-branded and entry-level credit cards throughout the years as part of its goal to grow its customer base. With the announcement of the no-annual-fee Blue Cash card and other options, it seems as if American Express is rethinking its strategy of controlling the cardholder market.

American Express merchant revenue

To join Amex’s network, retailers must pay a premium fee in addition to the company’s hefty membership and other expenses. Merchant fees, which are sometimes referred to as “discount revenue,” account for the lion’s share of the company’s income and earnings. Amex charges merchants that use its network two types of fees: percentage fees and flat rate fees.

The opportunity to reach Amex consumers with superior credit scores and, in many instances, greater incomes has led retailers to accept higher fees in exchange for access. A risk for American Express cardholders is that smaller merchants may choose not to join the network, putting them in a bind. American Express has retained its position as one of the world’s most popular credit card providers as more businesses join up for the service.


Although American Express has attempted to lower merchant prices, Visa and Mastercard continue to charge higher fees than Amex. As a consequence, the acceptance of the card issuer at retail locations will be delayed.

Due to its dual role as a payment network as well as a credit card issuer, American Express, on the other hand, has a substantial edge over the competition. As a result of its capacity to provide predictable and simplified services, the organization enjoys an edge over competitors such as Visa and MasterCard.

The present danger to Amex arises in a little section of town known as the “Golden Triangle.” Credit card debt is a big concern for customers between the ages of 18 and 35, due to their tendency for having credit card applications declined, as well as the fact that they only need to spend little amounts of money in order to amass credit card debt.

In conclusion, we investigated the topic “How does American Express make money”. We found out that American Express makes money by three key segments. The Global Consumer Services Group, the Global Commercial Services Group, and the Global Merchant and Network Services Group are composed of these entities (GMNS). Cardholders and merchant partners are the company’s primary income streams. American Express intends to increase the number of transactions completed with its credit cards soon by using a “spend-centric” strategy that emphasizes distinctive incentives and low fees.

Frequently asked questions (FAQ): How does American Express makes money

How does American Express earn income?

The majority of American Express’s income comes from discount revenue, which is generally represented by revenues on transactions that take place with partner merchants, according to the company. In addition to yearly membership fees, interest on outstanding amounts, conversion fees, and other expenses, the firm earns income from cardholders.

Why is American Express so profitable?

AmEx derives the vast majority of its income from the fees it charges merchants to take its cards, and the more money that is spent on the company’s network, the greater the company’s earnings tend to be on average.

How much does American Express make per transaction?

Depending on a variety of conditions, the exact prices may vary, but on average, American Express charges stores roughly 3 percent of each transaction, while Visa and MasterCard charge retailers around 2 percent on average. To put it bluntly, this is why you are more likely to go into a business that does not accept your American Express card than you are to walk into any other major issuer.

Is AmEx profitable?

Since the same quarter last year, the New York-based firm has recorded a rise in earnings of $1.83 billion ($2.27 per share), compared to the previous quarter. AmEx announced a record-breaking surge in cardholder spending in the third quarter, which the company attributed to an increase in profitability.

Why is AMEX so popular?

They are the best in the business when it comes to customer care, and they provide unique deals and discounts to clients all around the world. Their ability to provide timely service and successfully manage client queries puts them head and shoulders above the rest in the field. As a consequence, customers from all over the globe are willing to work with them.

What is Amex good for?

This club rewards members with extra points on grocery purchases, as well as dining and vacation vouchers. Rewards points may be shared with other traveling companions. The American Express® Gold Card offers a slew of advantages tailored specifically for traveling foodies.


Sheth, N. (n.d.). The American Express Business Model – How Do They Make Money?. Finty.

How American Express Makes Money: Fees And Growth. (2021, July 22). Investopedia.

CFP®, M. F. (2017, July 25). How American Express Company Makes Most Of Its Money | The Motley Fool. The Motley Fool.

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