Costco Got an Earnings Boost After Switching From Amex to Visa

Oct 3, 2016

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Earlier this year, the wholesale club Costco made news when it announced that it was ending its 16-year relationship with American Express, opting instead to sign a new contract with Visa. As of June 20, 2016, Costco customers have only been able to use Visa-branded cards when shopping at the warehouse giant. And as it turns out, the switch has played out in Costco’s favor so far.

Costco’s profit rose 1.6% to $779 million for the quarter ending August 28. The company says that even though it’s seen higher wages for workers and lower gasoline sales, its profit was boosted by lower credit card fees from Visa as compared to Amex. Since switching to Visa, 1.1 million Costco members have applied for the new Costco Anywhere Visa Card from Citi, and some 11.4 million co-branded Amex cards have already been converted to the new Visa-branded card.

This shift has been good for consumers as well, as we outlined in our post covering the best cards to use for all of your Costco purchases — including the Costco Anywhere Visa Card. The card comes with no sign-up bonus, but it will earn you 4% cash back on eligible gas worldwide up to $7,000; then 1% thereafter (including at Costco), 3% cash back on restaurant and eligible travel purchases worldwide, 2% cash back on all other purchases from Costco and and 1% cash back on all other purchases. This Visa-branded card offers a better return on spending than its Amex predecessor, and Costco executives hope that the card is an overall more appealing everyday option for consumers given that Visa cards are more widely accepted.

H/T: MarketWatch

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