In some amazing news, Costco Canada will no longer be accepting American Express cards as of January 1, 2015, either in store or on the Costco.ca website. The two companies have decided after fifteen years and a co-branded card to part company when their current agreement expires on December 31, 2014. I was really shocked when I heard about this.
Apparently, the separation comes about from tough negotiations during their latest contract renewal and they just weren’t able to come to an agreement. Neither side is commenting on what caused the breakdown in the relationship. However, if I had to guess, I would say that Costco wanted a more favourable transaction fee; the fee they pay to American Express when someone uses their card for a purchase at Costco. Since that is where American Express makes their money, it seems likely that is where Costco wanted something different, as in a much smaller percentage than American Express feels they deserve/want/need.
As I’m sure you all know, American Express is the only credit card accepted at Costco Canada (and most other Costco locations around the world). This kind of exclusive relationship with a retailer is really rare but was a great way for American Express to build up their membership with a certain type of consumer in Canada. I am certain this was a very lucrative arrangement for American Express, though all they will say is that the Costco relationship was a “sizeable portion of their portfolio” in Canada. I would imagine that the loss of a chunk of Costco Canada’s $17.2 billion in revenue (for 2013) will be a big hit to American Express operations in Canada. Not to mention, the only reason a lot of Costco members have an American Express is because of the co-branded card with Costco. If that is no longer an option, a lot of Costco members will get rid of their American Express in favour of using an existing MasterCard or signing up for the new co-branded Capital One MasterCard. This could really snowball into a nasty loss for American Express in Canada.
So, the big question: who will be the new credit card partner for Costco Canada? And the lucky winner is…..Capital One MasterCard. Apparently, MasterCard in general will be accepted at Costco Canada, according to a statement from MasterCard. I am sure that the acceptance of MasterCard at Costco Canada locations will make a lot of people very happy, since it is one of the mainstream credit cards that is already in a lot of wallets. I imagine this is a big win for Capital One too as they look to grow their business in Canada even more. And, I am sure, that they are looking to translate this in to a similar relationship with Costco US too. Exact terms and types of cards that will be available as part of the new Costco Canada and Capital One relationship haven’t been released yet, but I imagine that will be coming along in the next month or so.
I am sure that everyone has a lot of questions about what this means for their existing American Express TrueEarnings and Platinum Cash Rebate cards that were co-branded with Costco. Helpfully, Costco Canada has created a page where they address the most likely questions about what happens now if you’ve been using an American Express to shop at Costco Canada. I’ll try to summarize it for everyone:
- If your current Costco membership card is on the flip side of your co-branded American Express card, you can still use it as your membership card even after the end of 2014, you just can’t use it as a credit card anymore. Your membership will not be affected by the changes to the credit card situation at Costco.
- If your Costco membership renewal is billed directly to your American Express card, Costco will send you a renewal notice in the mail (the old fashioned way) if your membership is up for renewal in November 2014 or later.
- Right up until the end of the year, December 31, 204, you will still be able to use an American Express card to shop at Costco Canada locations or at Costco.ca. However, as of January 1, 2015 American Express will no longer be accepted at Costco Canada or Costco.ca.
- As of January 1, 2015 you will no longer be able to use your co-branded American Express TrueEarnings or Platinum Cash Rebate card for purchases at any merchant. Basically, these cards will cease to function at the end of 2014 as anything but an emergency ice scraper.
- If you accept a replacement card from American Express prior to the end of 2014 you will no longer be able to use your TrueEarnings or Platinum Cash Rebate card for purchases or to earn rewards. [This seems obvious to everyone I’m sure.]
- If you currently have a TrueEarnings or Platinum Cash Rebate card you can continue to use it to accrue rewards until the end of 2014.
- Costco US will continue to accept American Express as there is no change to their credit card agreement. However, as with all other merchants and Costco Canada, Costco US will not accept TrueEarnings or Platinum Cash Rebate cards issued in Canada after the end of 2014.
- Pretty much at the end of 2014 your Costco Canada American Express co-branded TrueEarnings and/or Platinum Cash Rebate cards are useless since they will not be accepted anywhere as a credit card.
- For all of the details, read the full FAQ at Costco Canada.
I know a lot of people are very displeased with the co-branded American Express cards, especially how they do their end of year rewards check, so I imagine a lot of people see the end of this relationship as a positive thing. I hope that the new cards with Capital One are even better than the rewards offered with the American Express, and that they have better customer service. As soon as I hear anything about the new Costco and Capital One MasterCard cards, I will be sure to share it with everyone here.
For more information:
- Costco Canada: FAQ Important information if you use an American Express to shop at Costco
- Bloomberg: Costco Stores in Canada to Stop Taking American Express
- Bloomberg: Capital One to Replace AmEx as Costco Canada Card Issuer
- Financial Post: Costco to stop accepting American Express cards in Canada, switches to Capital One and Mastercard