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On Monday, Costco Wholesale Corp announced that Visa International and Citigroup will replace American Express as its only card supplier next year, so many customers are currently concerned that their rewards and loyalty bonuses they earn when using AmEx cards will be severely affected.
However, Costco also said that the deal isn’t closed yet since there are many details that must be negotiated beforehand. The wholesale giant also reassured its shoppers that the transition from AmEx to Visa cards will be as easy as opening the mail.
American Express and Costco had had an exclusivity arrangement which was announced to end in 2016 after failed negotiations over business details in February. The deal lasted 16 years and it is one of the most enduring deals of its kind in the retail sector.
In February, AmEx noted that the retailer had offered little financial upside. So, the exclusivity deal is set to expire March 31, 2016. Costco ensured customers that they will receive details about how they could make the switch-over in the next few months.
The discount warehouse chain disclosed that AmEx would still be able to handle closed out Costco accounts and collect payments, even though shoppers were pushed to use rebranded Costco cards.
However, experts warned that a similar move performed by Costco in Canada last year was “disastrous” for clients. AmEx credit cardholders had to line up with crowds at their local Costco stores, then wait again in a another line for new photos, and finally wait some more until the new card was mailed.
But Bob Nelson, a Costco spokesperson, announced Monday that this situation would not be repeated since Citi Group is currently negotiating with AmEx to buy its portfolio of Costco accounts. As a result, customers would receive the new Visa cards next years without the additional hassle, Mr. Nelson added.
According to the retailer, Citi will manage the credit card accounts and issue the cards, while Visa, which is not a bank but a card network, would process payments. These functions were covered by AmEx in the previous deal.
Nevertheless, the deal will be dropped if Citi and Visa do not agree on all major details, but Mr. Nelson believes that that isn’t the case.
“I don’t think we would announce the agreement if we didn’t think it would occur,”
he also said.
In addition Costco reassured its customers that the new plastic would also “provide generous rewards” including cash returns and mileages but it didn’t mentioned further details. Mr. Nelson declared that at the end of the day the rewards will be very “compelling.”
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