Costco’s announcement that they would switch from American Express to Visa in 2015 was a bit surprising for many people. The two companies had paired together before the year 2000 and seemed to be holding strong. However, Costco made the announcement that they would no longer be accepting AmEx and that their co-branded credit cards would switch to Visa.
Initially, Costco announced that the change would take place on April 1, 2016. However, they’ve now announced that the switch is going to be pushed back until the summer of 2016. They are hoping that the switch will occur in June or midsummer. This may be good for some Costco customers that haven’t decided what they are going to do regarding the switch to Visa.
According to American Express, the change is occurring because the two companies were not able to negotiate terms that made sense for the credit card company. After 16 years of partnership, the two companies decided that it may be time to make a split. However, for 16 years, Costco co-branded cards made up about 10 percent of the company’s users. They will likely have to scout a deal with another large company to make up for the loss.
When the companies announced the change last year, Costco made it clear that their would be options for its customers that currently hold Costco’s co-branded credit cards. Now, the contract with AmEx (which was supposed to end on March 31) is going to be extended until the start date of the Visa cards.
Costco’s chief financial officer Richard Galanti said that there is a ton of information from the Costco cardholders that has to be switched over. Millions of people will be affected by the switch to Visa. It is just taking a little bit longer than any of the companies involved had initially planned.
Galanti is hoping that pushing the switch back until the summer will help the transition be more fluid for the wholesale retailer’s customers. Of course, Costco has only a little bit of say in that. The two credit card companies (American Express and Citigroup) have to make the final negotiations as to when one will stop and the other will pick up. Galanti said that Costco customers can expect to have no gap in the middle (between AmEx and Visa).
The wholesale retailer is reportedly getting the deal of a lifetime by switching to Visa. It has barely any expenses by switching to Visa while its deal with American Express charged the company 0.6 percent of each purchase. Costco will have the co-branded credit card with Visa and has announced that it will also be taking all other Visa credit cards as well. Its 688 warehouses will greatly benefit from the deal.
In August 2015, the company reportedly had over 81 million cardholders and they collected $593 million in membership fees during the last quarter of the year. With memberships continuing to rise, Costco isn’t likely to slow down any time soon.
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