AMEX/Costco Relationship to end in 2016 - CONFIRMED

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thom02099
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AMEX/Costco Relationship to end in 2016 - CONFIRMED

Postby thom02099 » Thu Feb 12, 2015 11:37 am

AMEX shares taking a beating on the stock exchange after the announcement on Thursday (today) that the exclusive relationship between AMEX and Costco in the USA will end in March 2016, when the current agreement runs out.
End of AMEX/Costco Relationship
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CC Deville
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Postby CC Deville » Thu Feb 12, 2015 6:19 pm

After what happened in Canada this comes as little surprise. Too bad, that TrueEarning's card was, IMHO, one of their best looking cards.

luvbullmarkets
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Postby luvbullmarkets » Thu Feb 12, 2015 7:24 pm

MasterCard really gets ahead in this move. Capital One will issue new Costco Cards but it will be over MasterCard's processing network.

If I'm not mistaken Sams Club / Walmart recently changed their cards over from Discover network to MasterCard.

*Note to self: Buy MasterCard stock*
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benhollberg
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Postby benhollberg » Thu Feb 12, 2015 8:47 pm

Has Capitol One been officially announced as the replacement?
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CarefulBuilder14
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Postby CarefulBuilder14 » Thu Feb 12, 2015 8:53 pm

benhollberg wrote:Has Capitol One been officially announced as the replacement?


For Canada Costco: Yes. Capital One now issues the equivalent of the True Earnings in Canada: http://www.capitalone.ca/credit-cards/costco/
But Canada Costco will take any MasterCard.

For USA Costco: I don't think any payment network or bank has made a deal, nor do any in particular stand out. Maybe Capital One has an edge if the deal goes well in Canada. It sounds like Amex will definitely not be accepted after March 2016, which goes further than simply announcing that Amex has lost exclusivity. So USA Costco warehouses will probably take Visa, MC, or maybe Discover (or a combination of them).

Also good reading: http://addictedtocostco.com/
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MrMosby
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Postby MrMosby » Thu Feb 12, 2015 9:41 pm

I guess this is a good time to buy some AXP stock. It took a hit today, but they're still claiming to be on track for their EPS goals.
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CarefulBuilder14
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Postby CarefulBuilder14 » Thu Feb 12, 2015 10:18 pm

MrMosby wrote:I guess this is a good time to buy some AXP stock. It took a hit today, but they're still claiming to be on track for their EPS goals.


I have thought about getting some Discover Financial, but I don't directly own shares in any payment network or bank. (I have some through index holdings and shares of Berkshire, which has substantial stakes in Amex, Wells, BofA, and others.)

Partly, I'm nervous about the potential of new companies and technologies that offer convenience to merchants and consumers at a lower cost. If more merchants start charging extra fees to customers who use credit cards, then more consumers might switch. I know that some states have laws that limit what merchants can do in this regard, and that some consumers are willing to pay more for the ability to use a credit card. But the fact remains that Amex's fat fees make it a big target - at least for consumer spending. I'm not so sure about business accounts.

I'm also uneasy about people like me who use the perks and rewards but don't generate a ton of revenue for them. Young people seem more focused on saving money where possible, and have a distrust of big banks. Young people have student loans to pay off, and have seen excessive consumerism make an unsustainable economic mess. I just don't see a lot of new customers getting the high-profit Green and Gold cards as status symbols, especially when they aren't unique and practical cards to the extent they used to be.

Amex's network definitely has value, and there is still some value in the image of the Amex Gold charge card. But I think the company's competitive position is getting weaker, not stronger. The fact that they failed to keep the Costco contract makes me wonder where the company is going. They seem a lot more focused on keeping their short-term margins high than actually retaining consumers.
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luvbullmarkets
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Postby luvbullmarkets » Fri Feb 13, 2015 1:08 pm

MrMosby wrote:I guess this is a good time to buy some AXP stock. It took a hit today, but they're still claiming to be on track for their EPS goals.


I just bought some AXP shares this morning. I view this as a temporary hiccup from a solid company.
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Postby CC Deville » Fri Feb 13, 2015 4:40 pm

It was announced today that JetBlue will also be ending its relationship with AMEX......

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Postby augiedog » Fri Feb 13, 2015 7:32 pm

Hmm... That's sad to me. It's the only card I've been able to use when I sneak in there without a membership occasionally...

CarefulBuilder14 wrote:Amex's network definitely has value, and there is still some value in the image of the Amex Gold charge card. But I think the company's competitive position is getting weaker, not stronger. The fact that they failed to keep the Costco contract makes me wonder where the company is going. They seem a lot more focused on keeping their short-term margins high than actually retaining consumers.


Maybe they don't see the costco card as being profitable enough for them to keep. They did (I think they still do) have the Whole Foods promotion on the Blue Cash card, and WF has had a few promotions about getting $5 free if you reload a gift card with an amex. Their relationships with different companies could be changing.
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