What American Express Is and How It Works

American Express is a financial services company that issues credit cards, charge cards, and travel-related products

American Express (often called Amex) is a publicly traded company that operates its own payment network — meaning it both issues cards and runs the system that processes transactions when you use them. Unlike Visa or Mastercard, which are networks that banks use to issue their own cards, American Express typically issues cards directly to consumers and small businesses under its own brand.

The company was founded in 1850 as an express mail and shipping business. It entered the credit card market in 1958 with the American Express Card, which was originally a charge card — a card you had to pay in full each month rather than carrying a balance. Today, American Express offers both charge cards (where the full balance is due monthly) and credit cards (where you can carry a balance and pay interest), along with business cards, corporate programs, and travel services.

American Express makes money primarily through annual fees on its cards, interchange fees (a percentage of each transaction paid by merchants), and interest charged on carried balances. The company also operates a travel booking service, offers travel insurance, and provides other financial products.

Key Takeaways

• American Express issues its own cards directly rather than licensing its brand to banks, which means it controls both the card and the payment network.
• Amex offers both charge cards (full balance due monthly) and credit cards (where you can carry a balance), each with different fee structures and benefits.
• The company charges annual fees on most of its cards, which is higher than many bank-issued credit cards but often paired with travel credits and rewards.
• American Express has stricter approval standards than many competitors, meaning cardholders typically have higher credit scores and incomes on average.
• Amex cards are accepted at fewer merchants than Visa or Mastercard in some regions, particularly outside the United States and at smaller retailers.

How American Express Makes Money From Cardholders

American Express generates revenue from cardholders through three main channels. The first is the annual fee, which appears on most Amex cards — ranging from no annual fee on some basic cards to several hundred dollars on premium cards. These fees are non-negotiable; you pay them once per year whether you use the card or not.

The second revenue source is interest charges on credit cards where you carry a balance. If you have an Amex credit card and don't pay your full statement balance by the due date, you owe interest on the remaining amount. The interest rate varies by card and your creditworthiness, but Amex publishes its rates in the card's terms and conditions.

The third source is less visible to you: interchange fees paid by merchants. When you swipe or insert your Amex card at a store, the merchant's bank pays American Express a small percentage of the transaction amount. This fee is built into the merchant's costs and ultimately affects prices consumers pay. American Express's interchange rates are typically higher than Visa or Mastercard, which is one reason some smaller merchants don't accept Amex.

Charge Cards Versus Credit Cards From American Express

American Express offers two distinct product types, and the difference matters for how you use the card. A charge card requires you to pay your full statement balance each month — there is no option to carry a balance or pay interest. The Green Card and Platinum Card are Amex's flagship charge cards. These cards typically have higher annual fees but come with premium travel benefits like airport lounge access and concierge services.

A credit card from American Express works like a traditional credit card: you can pay your full balance, or you can pay a minimum amount and carry the rest forward, owing interest on the unpaid portion. Amex credit cards include the Blue Cash Everyday and Blue Preferred cards, which focus on cash back rewards rather than travel benefits. Credit cards from Amex generally have lower annual fees than charge cards, though some still charge annual fees.

The choice between the two depends on your spending habits. If you pay off your balance in full each month anyway, a charge card's higher annual fee might be worth it for the travel perks. If you sometimes carry a balance or want to avoid annual fees, a credit card may fit better — though you'll pay interest if you don't pay in full.

Where American Express Cards Are Accepted

American Express cards are accepted at most major retailers, restaurants, and hotels in the United States. However, acceptance is not universal. Smaller merchants, gas stations, and some regional businesses may not accept Amex because of the higher interchange fees Amex charges them.

Outside the United States, Amex acceptance varies significantly by country. In Europe and parts of Asia, Amex is less widely accepted than Visa or Mastercard. If you travel internationally, you may want to carry a Visa or Mastercard as a backup. American Express publishes a merchant locator on its website where you can search for accepted locations in specific areas.

Some merchants that accept Amex may offer discounts for using other payment methods, or may charge a surcharge for Amex (though this is illegal in some states). Before relying on an Amex card for a specific purchase or trip, it's worth checking whether the merchant accepts it.

American Express's Approval Standards and Credit Requirements

American Express is known for having stricter approval standards than many competitors. The company typically approves applicants with higher credit scores, lower debt levels, and higher incomes. This doesn't mean you need perfect credit to be approved, but Amex generally declines applications from people with credit scores below 670 and significant recent negative marks on their credit report.

When you explore for an Amex card, the company pulls your credit report and reviews your credit history, income, and existing debts. Amex also looks at whether you've had previous Amex accounts and how you managed them. If you were denied for an Amex card, it's often because your credit profile didn't meet their threshold, not because of a single missed payment or low score.

The upside of Amex's stricter standards is that cardholders tend to have lower default rates, which allows Amex to offer premium benefits and rewards. The downside is that people rebuilding credit or with limited credit history may find Amex cards harder to obtain than cards from traditional banks.

Rewards and Benefits on American Express Cards

American Express cards come with different reward structures depending on the card type. Charge cards like the Platinum Card emphasize travel benefits: airport lounge access, hotel elite status, airline fee credits, and concierge services. These cards earn points on purchases, but the points are often worth more when redeemed for travel.

American Express credit cards often focus on cash back rewards. The Blue Cash Everyday card, for example, earns a percentage of purchases back as cash, with higher rates in certain categories like groceries and gas. Other Amex cards earn points that can be redeemed for travel, merchandise, or statement credits.

Most Amex cards also include purchase protections, such as extended warranty coverage, purchase protection against theft or damage, and fraud liability limits. Premium cards include additional benefits like trip cancellation insurance and rental car insurance. The specific benefits vary by card, so reviewing the card's terms before explore is important.

How American Express Compares to Visa and Mastercard

The main difference between American Express and Visa or Mastercard is how the payment system works. Visa and Mastercard are networks — they set the rules and process transactions, but banks issue the actual cards. American Express is both the network and the card issuer, which gives it more control over the customer experience but also limits where the card is accepted.

Amex typically charges higher annual fees than bank-issued Visa or Mastercard cards, but often includes more premium benefits. Visa and Mastercard cards are more widely accepted globally and at smaller merchants. If you want maximum acceptance and lower fees, Visa or Mastercard may be the better choice. If you value premium travel benefits and don't mind paying for them, Amex may offer more value.

Another difference is customer service. American Express is known for responsive customer service and dispute resolution, though this reputation comes with the higher fees you pay. Visa and Mastercard don't directly serve customers — your bank does — so the quality of service depends on which bank issued your card.

Frequently Asked Questions

Do I need excellent credit to get an American Express card?

Most American Express cards require a credit score of around 670 or higher, though some entry-level cards may approve people with scores in the 650 range. Amex also considers your income, existing debts, and payment history. You don't need perfect credit, but Amex's standards are stricter than many banks.

What happens if I can't pay my full balance on an Amex charge card?

If you have a charge card and can't pay the full balance by the due date, you'll owe a late fee and interest on the unpaid amount. Charge cards don't offer a grace period for carrying a balance — the expectation is that you pay in full. If you regularly carry a balance, a credit card may be a better fit.

Can I use my American Express card everywhere?

American Express is accepted at most major retailers and restaurants in the United States, but not everywhere. Smaller merchants, some gas stations, and many international locations may not accept Amex. Before relying on an Amex card for a specific purchase, check the merchant's website or call ahead to confirm acceptance.

Is the annual fee on an Amex card worth it?

Whether an annual fee is worth it depends on how much you use the card's benefits. Premium Amex cards often include travel credits, lounge access, and concierge services that can offset the annual fee if you travel regularly. If you don't travel or use these benefits, the fee may not be worth the cost.

How does American Express make money if I pay my balance in full?

Even if you pay your balance in full, American Express makes money from the interchange fees merchants pay on each transaction. Amex also collects annual fees on most of its cards. These revenue sources allow Amex to offer premium benefits even to customers who don't carry a balance or pay interest.