- Centurion Member
- Posts: 4042
- Joined: Thu May 08, 2014 7:42 pm
- Location: United States
I have no doubt that Costco was insisting on very low fees, and that Amex's profit margin from transactions at Costco would be pretty thin. I can understand that Amex wants to build relationships with a lot of different stores.
I still think Amex should have accepted the low fees Costco wanted. I know a lot of Costco fanatics. They shop there often because they like simplicity and want to get a good value. Most aren't concerned with complicated travel rewards or airport lounge access. Many wouldn't know what an MR point is. They like getting a little cash back and having one card that serves as a member ID and payment method.
For the last 16 years, a lot of them have followed logic like this:
"I like to shop at Costco and use a credit card in general. I want to be able to go to Costco on fairly short notice. Costco only takes Amex. Amex usually charges cardholders an annual fee, but I can get a Costco (True Earnings) Amex for no annual fee, so that sounds good. I guess I'll get one and carry it with me all the time."
And then that card became the primary or secondary card for a lot of people who generally pay on time, have good incomes, and just keep the card without asking for very much as far as rewards. Amex didn't have to worry about giving out big signup bonuses, or having to deal with churners like on other cards. Amex's margins on Costco transactions would be low, but it would be higher (I think) when that same TrueEarnings card was used at other merchants. A lot of the transactions would just earn 1% or 2% cash back while Amex was charging their full fee to non-Costco merchants who took the card.
In April 2016, a lot of Costco customers will be coming to the conclusion they just don't need to carry an American Express card anymore. I know Capital One in Canada hasn't been popular, but I think USA Costco customers would be okay with Chase instead of Amex (depending on the card's terms, at least).
WSJ is reporting in A1-A2 of today's paper that Chase and Citi are the main contenders in the USA "according to a person familiar with the discussions".
*Mouth watering at the slightest possibility of a card giving 1.5 or 2 UR points per dollar at Costco.*
Amex CEO Ken Chenault said "They are Amex customers as much as they are Costco customers" but that's just not accurate among the Costco shoppers I know. They are Amex customers only because they are Costco customers.
WSJ does also say the Jet Blue contract is nearing an end, but it could possibly be renewed. Also, it's a much smaller contract for Amex.
Very useful: SchwabPlat, CSP, IHG, Costco (was AA Plat), Freedom, SPG
Somewhat useful: Discover, ED (was EDP), BCE, Hyatt, Arrival
May close or PC: Prestige, BrooksBros
Might add: Proper business card, CSR, Ritz, Delta Gold, First Tech