Costco Will Pay ~Zero to Accept Credit Cards

Discussion in 'General Discussion | Credit Cards' started by MX, Apr 18, 2015.  |  Print Topic

  1. MX

    MX Gold Member

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    Details of the groundbreaking deal between Costco, Visa, & Citibank have been published here.
    Continue reading...
     
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  2. Betty Boop

    Betty Boop Gold Member

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    Still not happy about this change at costco. Just replied to a survey that I loved my Amex open business card and did not want to change to a visa.
     
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  3. chitownflyer
    Original Member

    chitownflyer Silver Member

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    This is a good arrangement for Costco, and I am surprised how they were able to negotiate it, but Citi really wanted the business and cobranded Costco card.
     
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  4. othermike27

    othermike27 Silver Member

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    Thanks for posting this.

    Costco and VISA seem to be clear winners in this deal, but I wonder about Citi. It will be interesting to see what incentive program Citi offers to capture the customer base now holding Costco AMEX cards. Seems to me that most folks who signed up with AMEX for an added cash-back bonus would not be thrilled with Citi Thank-You points instead.

    {Edit - oops, somehow missed a key word.!]

    Also want to see what AMEX will do to retain its credit card customers. My thought was just to transfer the Costco CL over to SPG and close the Costco, but if AMEX wants to offer me some kind of incentive, I'm listening...
     
    Last edited: Apr 18, 2015
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  5. satman40

    satman40 Gold Member

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    What Costco has done is squeeze smaller merchants further, CC give discounts per charge volume.

    Costco is already one of the powerhouses for higher wages among small businesses.

    Not a bad thing, if you are big.

    I am a Costco member.mom and pop stores can only go so far.
     
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  6. traveltoomuch

    traveltoomuch Silver Member

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    I'm wondering how other Visa issuers are going to react. According to the article, Visa has set interchange fees for these transactions at .4%. That won't come close to paying for the cash back or miles that most of us are earning from our Visa cards. How long will Chase, Barclay, etc. tolerate subsidizing Citi's play? Will we see some Visa cards converted to MC?
     
    Last edited: Apr 18, 2015
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  7. satman40

    satman40 Gold Member

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    I think all volume buyer of a product gets a discount for money spent.

    At Costco Business member can use their credit card machine service.

    CCs, make a large profit from late payments,,and extended loans, if the Government will stay out of their way and let them collect the debt.

    Business is tough, enough with bad checks, theft and looting, Unions, and Government enforcement of laws, for a sole-proprietor., much less a large company.

    I am often amazed Costco does so well, including the stock,,great investment over the years.

    Many miles, and Free a Hotel rooms Expire unused...and many MS type end up in debt and broke,,very few retire millionaires.
     
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  8. MX

    MX Gold Member

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    I would rather call this a forced discount to Costco, and Citi is apparently covering the remaining 0.4% with their "incentives". For now it remains to be seen if Citi would more than make up their expenses with fees and interest income.
    I think that other banks must be concerned with the precedent established here. Who's the next giant retailer to ask for a similar deal?
     
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  9. othermike27

    othermike27 Silver Member

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    Yes, agreed.

    But this may be less of an issue if Citi fails to convert the majority of the current AMEX Costco card holders to Citi cards. For me, I have plenty of VISA cards already, including some that give me reasons to use them at Costco next year (e.g., Chase UR points, even at only 1:1). I don't really need another VISA unless Citi offers me a strong incentive to take it, which they may not be able to afford, as you say.
     
  10. satman40

    satman40 Gold Member

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    I would hate to guess the charge dollar volume Costco does, many store push their own CC brand.

    Costco has keep me Gold at SPG, not staying at the hotels., I am sure we all will adjust..
     
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  11. Newscience

    Newscience Gold Member

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    If I can soon use my Chase Visa cards at Costco, that is a good thing! :)
     
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  12. satman40

    satman40 Gold Member

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    You can always use you CHASE VISA at Costco, just order on line..,you can also use it at the optical department in he store...

    Pre paid GC work at the self check outs..
     
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  13. Gargoyle
    Original Member

    Gargoyle Milepoint Guide

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    Companies will cut their own throats to steal market share. Citi just got a huge chunk of market share away from AMEX.

    Or perhaps it's just the old concept of "lose money on every transaction but make it up on volume".
     
  14. MX

    MX Gold Member

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    That's certainly the case here!
    AmEx was wise to step away from the bidding frenzy. Rather than holding on to the old product at any cost, they're now free to invest in new ideas, and hopefully more promo's that we can use. ;)
     
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  15. Gargoyle
    Original Member

    Gargoyle Milepoint Guide

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    I just wish they'd invest in lowering merchant fees in Europe. I find it hard to find merchants who accept AMEX in Italy, because their fees are significantly higher than Visa. (one merchant told me that the baseline starting fee his charges is 1 Euro with Amex, so if I charged a 10 Euro item he'd lose his entire profit margin. He accepted my Visa).
     
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  16. othermike27

    othermike27 Silver Member

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    AMEX lost market share, and VISA gained it, for sure. But my point is that Citi may not be a gainer here if they don't give cardholders at least as good an incentive as the AMEX/Costco deal did. Citi may never get a chance to "make it up on volume" if they don't bag most of the card-holders as their customers.

    Another way to say it: as a current Costco customer who holds a Costco AMEX, whose customer am I - the credit card issuer or Costco? Who is at risk of losing me in the transition next April? I'll be waiting for offers...:D
     
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  17. othermike27

    othermike27 Silver Member

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  18. daninstl

    daninstl Gold Member

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    I hadn't thought about it until now but I assume this change in relationship will effect the travel deals that Costco offers. I'm just guessing that they have been using AMEX travel for these "deals".
     
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  19. Slow_Mustang
    Original Member

    Slow_Mustang Silver Member

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    Say what? How do you make money on volume if you lose on each and every transaction? :)
    I am not too smart to figure this one out.
     
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  20. MX

    MX Gold Member

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    It's a reference to an old joke, and often used to ridicule a lack of business or common sense.
     
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  21. Slow_Mustang
    Original Member

    Slow_Mustang Silver Member

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    Thanks for the explanation. Excuse my ignorance, but it takes a lifetime for immigrants to get on board with every facet of Americana. :)
     
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