Why do some stores not accept certain credit cards but will accept others?

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Why do some stores not accept certain credit cards but will accept others?

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Credit cards charge a processing fee to the vendor when a customer pays with credit. Some credit companies charge more than others (generally AMEX) so vendors just don’t use them

Since it’s ELI5, imagine you’re selling oranges in front of your house but people keep showing up without cash. You’re losing out on sales so you finally decide it would make sense to accept credit cards.

What next? You’re going to have to go find someone to set up a credit card machine you. It’s going to take time and cost you money to do that. Are you going to want to do that for every possible card type? Or might you just find 1 guy who can set it up to handle visa/mastercard and decide that’s enough…

Occasionally certain merchants won’t accept American Express (AMEX) as they charge a slightly higher fee to the merchant.

Credit cards cost the merchant generally about 1.5%-3% of the sale to run for visa and mastercard, AMEX is generally at the top end or higher, and some merchants just don’t want to pay the extra.

First shot at ELI5 answers, go easy on me.

Credit cards when used do not charge the customers any fee because we are spending money. But merchants (the stores who receive money) get charged a percentage of the amount charged as a fee (called processing fee).

Card issuers (companies who issue credit cards – VISA, Mastercard, American Express) charge this fee because they know that the sale of the store will increase when credit cards are accepted because since introduction of credit cards most people prefer to earn rewards that you get while spending on credit cards (points, cashback, miles etc) which makes people want to spend more and also its much safer than carrying actual money.

This puts the card issuers at an advantageous position which allows them to charge a percentage of the transaction as fee from the merchants. Merchants know its a loss, but they hope to make up for this in the excess of sale they make from doing business with credit card users.

Some added info:

Most small-scale merchants only decline cards with high processing fees and are relatively used by a small percentage of people. That’s why typical mortar stores outside US usually ban Amex as they are usually high on processing fees. Big issuers like VISA and Mastercard are only declined at stores that are big and have a loyal fan base and know that customers will shop regardless of the type of cards they accept (Eg: Costco)

Hope this helps!