EBay Drops American Express, Citing ‘Unacceptably High Fees’

The eBay logo is displayed on the roof of eBay headquarters in San Jose, Calif., on Jan. 24, 2024. (Justin Sullivan/Getty Images)

E-commerce marketplace company eBay is ditching American Express as a payment option, blaming high processing costs.

“At a time when payment-processing costs should be declining because of technological advancements, investments in fraud capabilities, and customer protections by merchants like eBay, credit card transaction fees continue to rise unabated because of a lack of meaningful competition,” eBay said in a June 5 statement.

“After careful consideration, eBay has decided to no longer accept American Express globally effective Aug. 17 due to the unacceptably high fees American Express charges for processing credit card transactions.”

With consumers and small businesses concerned about inflation, there is a need for “more robust regulations” that create greater competition among card networks. This will contribute to reducing transaction processing costs for merchants and also customers, the company stated.

The e-commerce company is in the process of notifying customers about the change to ensure a smooth transition to alternate payment options. The company cited internal research and claimed that the vast majority of users are willing to use alternate payment methods. eBay has 132 million active buyers globally.

American Express criticized eBay’s decision, claiming that the move will “limit customer’s payment choices” while taking away the security and numerous rewards offered by the company.

In the United States, processing costs for American Express (AmEx) are “comparable” to what eBay pays for similar cards in other networks. The e-commerce platform’s decision to ditch AmEx isn’t consistent with its stated objective to increase competition at the point of sale, according to the credit card firm.

American Express pointed out that eBay represents less than 0.2 percent of its total network volume, suggesting a low financial impact on the firm.

Payment processors, including American Express, take out a certain percentage of transactions processed on their network by any merchant.

The National Retail Federation (NRF) estimates that the so-called swipe fee average is more than 2 percent for credit card transactions and can go as high as 4 percent for some cards. The organization calls swipe fees the “highest operating cost” borne by many retailers after labor, thus making it a key issue for businesses.

The fees hurt buyers as well since it pushes up consumer prices by more than $1,000 annually for an average household, according to the group. This negatively affects retail sales as customers buy less when they have to pay more.

Credit Card Industry Competition

EBay’s decision to drop AmEx comes as lawmakers are pushing for more competition in the credit card industry.

In June 2023, a group of bipartisan lawmakers introduced the Credit Card Competition Act, which aimed to “enhance competition and choice in the credit card network market which is currently dominated by the Visa–Mastercard duopoly,” it states.

Of the four major credit card networks in the United States—American Express, Mastercard, Visa, and Discover—Visa and Mastercard alone account for 83 percent of general purpose credit cards, according to the statement.

“Visa’s and Mastercard’s market power and network structure have enabled them to impose fees on U.S. merchants that are among the world’s highest, charging a total of $93 billion in U.S. merchant credit card fees in 2022. These fees include interchange or swipe fees. ... Consumers ultimately pay for all of these fees in the price of the goods and services they buy,” the statement reads.

The act directs the U.S. Federal Reserve to ensure that big banks that issue credit cards allow customers to use at least two payment networks over which a credit card transaction is processed.

Leslie G. Sarasin, president and CEO of The Food Industry Association, pointed out that a lack of competition has so far allowed credit card companies to “exponentially” raise processing fees over the past decade.

By requiring more than one payment network on a single card, the measure would force the credit card networks to compete, she said.

Mastercard has opposed the legislation. In a September 2023 letter to senators, the company pointed out that customers are empowered by electronic payments since “they gain access to credit for essential purchases, benefit from float, have zero liability if something goes wrong with their purchase, can earn rewards for their purchases, and are protected from fraud.”

The act would put all these benefits at risk, according to Mastercard. It claimed that the bill, if enacted, would thwart competition in the credit card industry.

“Competition is threatened when policy is made in the absence of facts.”

Banking groups also oppose the Biden administration’s proposed actions against late fees in the credit card industry.

In March, the Consumer Financial Protection Bureau finalized a rule to slash credit card late fees to $8 from the current average of $32.

Rob Nichols, president of the American Bankers Association, called the rule a “flawed” regulation that will “reduce competition and increase the cost of credit.”

He also said the rule would result in “more late payments, higher debt, lower credit scores, and reduced credit access for those who need it most.”