AmEx And Costco Get A Divorce
Attention Costco shoppers: You will soon need to use a different credit card at the warehouse club. Costco won’t accept American Express cards after March 31, 2016, and customers with the “co-branded” TrueEarnings Costco-AmEx card won’t be able to use it anywhere else either.
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[/one_fourth][three_fourth_last]Costco has exclusively been accepting American Express (AmEx) which drove a significant chunk of business to the New York card company. While they were collaborating together, they decided to create a credit card together that could also be used at other merchants.
Once the arrangement between Costco and AmEx ends next year, millions of customers will be forced to use a different credit card when shopping at the wholesale store.
AmEx was already falling short of some sale targets and the failure to agree on new terms was a fresh new blow. The move will be affecting roughly one in ten AmEx cards in circulation and is going to eat into the company’s results in the next two years. AmEx stocks have dropped $5.53, or 6.4%, to $80.48 on Thursday. This is the largest one-day percentage decline since August 2011 for Costco.
One good thing that helped other credit-card firms was that they are all racing to team up with the fast-expanding wholesale club, which sells everything from car tires to smoked salmon.
AmEx issued credit, charge cards and owns a processing network. They have been unable to reach a new agreement with Costco on terms that “would have made economic sense” for the company.
If Costco and AmEx were to have stayed in the unstable relationship the move would have a negative impact on revenue and earnings per share in 2015 and 2016. Being divorced from one another, the company will be able to achieve its earnings-per-share growth target of 12% to 15% “moderate to long term” without the Costco arrangement
