Why Costco customers are winning with switch to Visa cards

The much talked about transition of Costco’s branded credit cards from American Express to Visa has happened. As of June 20, it’s all Visa all the time for Costco cardholders.

In Feb. 2015, Costco told customers they would have to let go of their TrueEarnings Amex cards. Citi purchased the full portfolio in March, and began issuing Visa cards (with new card numbers) to existing cardholders in May.

Customers enter a Costco warehouse store in Matthews, N.C., Thursday, Feb. 7, 2008. Among the few winners reporting January sales figures Thursday was Costco Wholesale Corp., whose results beat Wall Street expectations. Costco reported a 7 percent gain in same-store sales, surpassing the 6.6 percent estimate. (AP Photo/Chuck Burton)

Customers enter a Costco warehouse store in Matthews, N.C., Thursday, Feb. 7, 2008. (AP Photo/Chuck Burton)

For cardholders, the change is relatively painless and probably beneficial.

All existing cardholders were pre-approved for the Visa card, so there were no credit inquiries or applications necessary. Rewards accrued on old cards should have been switched to the new cards. And finally, outside of the Costco club annual membership fee of $55, there are no card fees attached to the accounts.

Under the new partnership with Visa, there are more opportunities for Costco customers to earn rewards because the rewards are more generous (only one reward remains the same from the Amex card terms) and Visa is accepted at more locations than Amex.

Here are the program terms for the new Costco Cash Rewards (minus returns and refunds):

  • 4% cash back on eligible gas worldwide, including gas at Costco, for the first $7,000 per year in gas purchases and then 1% thereafter. Certain Non-Qualifying Purchases.You will only earn 1% cash back, not 4%, for gas purchased at superstores, supermarkets, convenience stores and warehouse clubs other than Costco or for fuel used for non-automobile purposes.
  • 3% cash back on restaurant (including cafes, bars, lounges and fast food restaurants) and eligible travel purchases worldwide, including airfare, hotels, car rentals, travel agencies, cruise lines and Costco Travel. Certain Non-Qualifying Purchases. You will only earn 1%, not 3%, for purchases made at bakeries and certain restaurants/cafes inside department, grocery or warehouse clubs.
  • 2% cash back on all other purchases from Costco and Costco.com.
  • 1% cash back on all other purchases, including the non-qualifying purchases listed

Costco cardholders accounted for 17 percent of American Express’ U.S. customers last year, so naturally the company is hoping to earn back some of those people.

Amex has reportedly been sending existing Costco cardholders offers for its Blue Cash Everyday card which has no annual fee and offers 3 percent cash back at U.S. supermarkets, 2 percent back at gas stations and select department stores, and 1 percent on other purchases.

In some cases, applying for this card may result in a credit inquiry which can slightly lower your credit score, but for Costco members hoping to retain an American Express account, it is an option.

In a recent interview with the AJC, an American Express executive said their reach is expanding in the Atlanta metro area. The number of businesses in the metro area that accept Amex increased 40,000 in Atlanta between 2013 and 2015. The company has put much of their focus on reaching out to small business owners, making it easier for them to accept American Express cards.

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2 comments
cbmfam
cbmfam

Unfortunately, the rollout of Costco's new Visa card, is fraught with problems.   My card had the wrong Costco member number, so Costco had to override it for me to get gas and again to shop in the warehouse.  The phone numbers I was given to resolve the problem wasn't correct and I had to call two other numbers.  The phone was busy and instead of taking a message, the recording told me to hang up and call back.  I hope I was finally able to get the correct member number on my account.  The agent told me it would take 5-7 business days for me to get a corrected card.  American Express would have overnighted a new card to me.  In the meantime, I have to carry a piece of paper with my correct Costco number on it every time I want to use my Visa at Costco.  I am not a fan of the new card.

NLreadsJC
NLreadsJC


The cash rebate benefits are definitely better.  However, the transition has not been painless. I had severe problems setting up Apple Pay and changing the credit card on some of my accounts.  Trying to get to customer service has been a nightmare.  I have had 7-10 messages stating that they were very busy and I should call back and then disconnected me.  Since I had a billing question that was time constrained, I decided to go with the literal directions from the material mailed out ahead of time, but was told later that I should have paid Citi rather than AE which provided the statement.  But at  least, I will not be charged a late fee since it will take several days for AE to transfer the payment to Citi per the Citi rep via chat.   I did manage, after a 45 minute wait, to get to a customer service rep on a security issue, but at least I wasn't disconnected.  I am sure things will get better, but I AE customer service has always been superlative for me..   I hope Citi will reach that after some start up time.  But I think Costco and Citi were not very prepared for this transition.