Apparently about to land another banking partner, Costco Wholesale Corp. has decided to end its 16-year deal to accept only access American Express cards in its stores.
The deal, expiring March 2016 at the end of the current contract, was a big blow to AmEx. Costco represents eight percent of AmEx's global customer spending and 20 percent of its interest-bearing credit portfolio. Kenneth Chenault, AmEx's CEO, told Reuters, "We were unable to reach terms that would have made economic sense for our company and shareholders."
For Costco, the move was initially seen as a chance to shift strategy and, like other retailers, start accepting many forms of card payments as a convenience to shoppers. Outside of AmEx, Costco stores accept only cash or debit cards. Among major chains, only Sam's Club has similar restrictions, refusing to accept Visa or AmEx.
However, the Los Angeles Times reported Costco is close to reaching a deal with a new credit card company for exclusive rights.
With new payment systems arriving, the Costco change is seen as a sign of the leverage retailers may be gaining in negotiating swipe fees. Costco is seeking "significantly" lower fees than the average 2.45 percent AmEx charges merchants.
AmEx has been able to charge higher swipe fees in general because its well-heeled members spend significantly more on average than Visa and MasterCard members. Many restaurants and stores don't accept AmEx because of those higher fees.
While the card switch could be a hassle for Costco members, the new partner might be able to purchase AmEx's portfolio, meanig members would only have to be sent new cards, Bob Nelson, a Costco spokesperson, told the LA Times.
Some concerns were also voiced over whether the new cards would pack the same awards as the AmEx cards. TrueEarnings Card members gain three percent cash back at U.S. gas stations, two percent cash back at U.S. restaurants, two percent back on eligible travel purchases, and one percent cash back on other purchases. There's no annual fee with a paid Costco membership.
One online commenter to a Wall Street Journal article on the change said, "Unless the new Costco branded card is an amazing deal, we'll probably just go to debit."