Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, April 21, 1991                   TAG: 9104190787
SECTION: BUSINESS                    PAGE: E-1   EDITION: METRO 
SOURCE: By LEONARD SLOANE/ THE NEW YORK TIMES
DATELINE:                                 LENGTH: Medium

A COSTLY CREDIT CARD SCORNED

"You're talking about some serious money," said Joe Allen, owner of Orso, white-linen restaurants in New York and Los Angeles as well as the restaurants bearing his name in New York and Paris, which also do not accept the American Express card. Orso serves moderately priced Italian food while Joe Allen serves moderately priced American food.

Diners can still charge their meals at establishments that do not take American Express, but they have to use other credit cards, like Visa or Mastercard. Many restaurants will also set up house accounts for regular customers who can then simply sign their checks.

Many of the restaurants that dropped the Amex green and gold cards say they also will not honor the Optima card, the revolving credit card issued by American Express.

Executives of those restaurants say the commission charged on Optima cards is also too high, compared with the charges on Visa and Mastercard cards issued by banks and other financial companies.

American Express cards are used for other purchases besides restaurant meals, but stores, theaters and mail-order companies, for example, do not seem to be voicing the same resentment against the commissions.

According to The Nilson Report, a Los Angeles credit-card newsletter, the commission on American Express charges, also known as the discount rate, ranges from 2 1/2 percent to 5 percent of the amount charged by diners, as against 1\ percent to 3 1/2 percent charged by bank cards.

The percentage typically declines as the volume rises, so that the smallest restaurants pay the biggest commissions.

Many restaurant owners have long expressed resentment about the high American Express fees. But in the last year or so, the complaints have grown in volume and intensity as the recession gained strength and as Americans sharply reduced spending on dining outside the home.

"I will not carry the American Express card after April 15," said Jasper White, owner of Jasper's in Boston, an expensive American-style restaurant. "We're paying 2 percent extra, and that is on the gross, including tips and state taxes. It's not worth it to me to carry it any longer."

Officials at American Express say they are aware of the concern about the fees. But they note that American Express has been planning for a year and a half to adjust commissions and that it will announce a new fee schedule by May 1.

And Norma Arnold, senior vice president for marketing, said that by focusing purely on rates, restaurants ignored other important factors in comparing cards.

"We acknowledge that we have a premium rate, but we provide extra services," she said. These include promotions like making a list of card holders available to participating establishments.

Specialists in the credit-card field say several restaurants that considered dropping American Express over the years have hesitated because so many expense account diners use the card for business purposes.

"Somebody may not want to put that purchase on their personal credit card," said Kurt Peters, editor of Credit Card News, a trade publication.

Some restaurateurs who continue to accept American Express think the difference between its rates and those of the bank cards is too large.

"They're entitled to be higher than the other guys, but are they entitled to be twice that of the other guys?" asked Richard Melman, president of Lettuce Entertain You, a chain of 30 inexpensive theme restaurants based in Chicago. "I don't think so."

RAM Research, a credit-card research company, reports that more than 5 million establishments around the world accept Visa and Mastercard and about 4 million accept American Express. Experts say most holders of American Express cards also have at least one bank card.

American Express officials say one step they will take soon will be to institute a two-tier pricing mechanism. The company plans to charge half of a percentage point less to restaurants that file credit data through electronic terminals.