American Express & Costco to End Partnership
American Express announced today that they were unable to come to an agreement with Costco to extend their relationship. The current contract between the two companies will end on March 31, 2016.
Negotiations
Since the agreement still has more than a year, I find it surprising that an announcement would be made so soon. It is my guess that American Express and Costco were too far apart to agree to terms. Costco has already adopted Capital One as their credit card partner in Canada which may be an indication that they are looking to go in another direction.
Co-Branded Cards
According to the press release, “Until that time, all American Express credit cards will be accepted at Costco warehouse stores in the U.S and on Costco.com. All co-branded cards from American Express and Costco can be used any place American Express cards are accepted through March 31, 2016.”
It will be interesting to see what happens with the co-branded cards once the agreement ends. It is clear that they will no longer be accepted at Costco, but not much else has been announced.
Conclusion
In my opinion, this isn’t a huge deal for anyone other than possibly American Express. I am interested to see if Costco will begin accepting either Visa or Mastercard when they find their new partner. Of course Sam’s Club also recently kicked Discover to the curb as well. A Discover/Costco partnership would be interesting!
You can find the full text of the press release here.
HT: flyertalkerina2 on Twitter
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[…] year. In addition to losing their partnership with JetBlue, they lost the incredibly lucrative contract with Costco who chose Citi & Visa instead. Additionally their stock has seen downward pressure due to […]
I really don’t like Capital One (3 hard pulls, etc.). I would have recently cancelled my last card with them (Venture), but they waived the AF. They said it was a one-time waiver, so I guess that means I’ll get rid of it next year.
Yes applying for a Capital One card is a painful considering the they pull from all three bureaus.
Don’t think they will switch to Discover.
Based on the information out there I tend to agree. I just threw it into the mix for discussion since they recently broke ties with Sam’s Club.
I suspect that AMEX will lose a lot of business. I only owned an AMEX so I could use it at COSTCO. I occasionally used it other places but it’s hard to find a merchant that takes the failure of a card anyway. AMEX has the highest foreign transaction fee in the industry. I think a lot of people only have that extra card in their wallet because they are COSTCO shoppers. I’m happy to be getting rid of a card out of my wallet. COSTCO Canada ditched AMEX last year and went with MasterCard. I hope they do that in the US as well as there are great card options available.
I only used my Costco Amex to add to my arsenal of Amex Offers, mostly Small Business Day.
I have a hard time understanding why people get attached to credit cards. As in, using the same card for multiple transaction types. I look at credit cards as tools in a tool bag. I find the best card to use in a specific situation and if it’s not needed, back in the bag it goes. There is surely a sweet spot for everyone as far as the number of cards they keep. Keep in mind closing this account, as opposed to downgrading to a no AF card (if Amex goes this route), could negatively impact your credit more so than stuffing it in a sock drawer, never to see the light of day again (you want older accounts to remain active to improve the age of credit).
There was a thread on Slickdeals and a lot of angry people. One wrote he’ll be cancelling the card immediately so that he can prevent waiting on the phone for hours to beat others to the punch.
I personally feel indifferent to the news today. The change is more than a year away, and a lot can happen between now and then. Change is a quality of life, and I’m not worried in the slightest about what 2016 holds as far as payment methods at Costco.
Haha. I agree. As a consumer this news really shouldn’t matter. American Express as a company may have some issues, since this represents a good chunk of their income.
In another article, it was noted that the AMEX-Costco co-branded cards represent about 10% of AMEX’s cards in circulation. I wonder what they will offer these folks as an alternative. I cannot see AMEX walking away from 10% of their base over a dispute with ONE merchant. Any ideas?
According to one report 70% of the spend on the co-branded Costco cards is made outside of Costco stores. This means that these customers are using the card for everyday spend beyond Costco.
That same report speculated that Amex could possibly sell the portfolio to another bank (not sure how that would work) or more likely roll the customers into other Amex products. The stock is down big today and many analysts are expecting a huge hit to earnings. I have to believe that American Express will make some sort of move to counter this.
They could just keep the True Rewards card as is except for the Costco branding and offer it to non-Costco members starting in April ’16.
Price Club (where the guys who started Costco trained) only accepted Discover. When they were bought out by Costco they switched to Amex. So there is a history there
Good point. I think Discover would make a great partner!
Not for me. If they do that, then I’ll buy Costco cash cards like FreeTravelGuys does. I would like to see them offer a World MasterCard for Gold/Business Members and World Elite MasterCard for Exec Members.
When I was at my local Costco last weekend, there were a few representatives promoting/accepting the AMEX Costco credit card near the entrance, which I have never seen in my Costco since I became a member 2 years ago. This might be a sign that AMEX is trying get as many Costco customers to their card while they can?
It would make sense. I am sure they will move those cardholders to a regular Amex card like the Blue. Why not sign up as many as they can!
Easy workaround to whatever happens is to just purchase Costco cash cards online. Costco lets you pay for those with any type of credit card. I use this method every time I need to meet Visa or MasterCard minimum spending.