AmEx-Costco Divorce, and What it Changes for Customers

After a 16-year partnership, Costco and AmEx are calling it quits. The split delivers a serious blow to AmEx's market value, but the adjustment for customers should be modest.

AmEx-Costco Divorce, and What it Changes for Customers Photo (cc) by tellumo

Costco and American Express are splitting up, ending a 16-year partnership. Their exclusive agreement, in which Costco only accepted AmEx credit cards, will end March 31, 2016.

The decision was based purely on economics, according to Costco.

“Everything comes down to cost and saving money for our members, and that’s what it’s all about,” Bob Nelson, vice president of investor relations for Costco told The Wall Street Journal.

AmEx said the split would negatively impact its earnings for the next two years, “sending its shares down as much as 7 percent and wiping out about $6 billion of market value,” Reuters said.

“It’s not easy to see a long-standing partnership end, but when the numbers no longer add up, it’s the only sensible outcome,” AmEx CEO Ken Chenault said in a conference call with analysts.

Spending on AmEx cards will be slashed by about $80 billion a year, which includes use at Costco and other stores, as a result of the split, Reuters reports.

Costco won’t accept AmEx cards after March 31, 2016. If you have a co-branded TrueEarnings Costco-AmEx credit card, you won’t be able to use the card at Costco or anywhere else, the WSJ said. AmEx plans to offer its TrueEarnings card customers a different card.

Costco and AmEx recently ended a similar relationship in Canada, and Costco replaced its store-branded American Express card with a Capital One MasterCard.

“The company has reportedly been negotiating with CapOne and MasterCard to do the same for its U.S. stores,” Consumerist said.

What do you think of the AmEx-Costco split? Will it affect you? Share your comments below or on our Facebook page.

If you shop at Costco or other warehouse stores, watch this video to learn how they try to get you to spend more money than you intended:

Comments

1,289 Active Deals

More Deals