Why Costco and American Express are Breaking Up…and What to Do About It!

WHY Costco and American Express are breaking up, and WHAT to do about it! From FunCheapOrFree.com

Word has gotten out that Costco and American express will no longer be working together, so I'm here today to set the record straight since I've started getting lots of questions about it from Freebs like yourself. S
eeing as how I've become somewhat of a Costco expert over the years and all (how? See below!) I wanted to stay on top of the issue. I did a little sleuthing and got to the nitty-gritty of this breakup!

I thought I'd share with you WHAT I learned, HOW it affects you, and WHY it affects you (and what to do about this whole fiasco, anyway).

Let us start at the beginning, shall we?

WHY are Costco and American Express breaking up?

If you've ever shopped at Costco, you know the only way to use a credit card to pay for merchandise is to use an American Express card, the most benefits coming from their Costco-Specific card. They have had a loyal relationship with Amex for 16 years and it has been all fine and dandy…until…

According to staff at Costco (whom I politely drilled) they explained that Sams Club has recently signed an exclusive deal with Discover card, which allows their members 4% cash back. Costco, being the big dawgs they are, refuses to be second best; their card only provides 3% cash back.

Costco approached Amex telling them (in my own words, of course) that they want a better deal than the Discover/Sams deal, and want to offer their members 4% or higher. Amex allegedly said no initially, then offered the solution that they would then need to raise their interest rate to make up for the higher percentage.

Costco wouldn't accept it. Thus, after what I can only imagine to be exhausting negotiations, Costco decided to retire their long-term relationship and jump ship.

WHAT will the new card be? WHEN will the changes take place?

The new partnership is with VISA. Costco will officially end their relationship with Amex on March 31, and VISA will start April 1.

WHAT should I do about it?

Nothing yet. We don't know what the card details are, what the cash-back % or interest rate is, nada. They are supposedly still in negotiations or at least haven't announced details yet.

Unfortunately, I'm not going to tell you exactly what you should or shouldn't do…but…

Here are some tips on how to know what to do:

  1. Read, read, and re-read the fine-print. When the new card comes out, make sure you fully understand the details of the card before committing.
  2. If you decide to no longer use the Amex, DON'T close the account! It's better to leave an account inactive, than it is to close out a card (when it comes to your credit score, anyway). Leave it in a filing cabinet somewhere as an emergency card if needed.
  3. If you decide to continue using the Amex, use it well! They still give you cash back on purchases made outside of Costco, so it's not a worthless card by any means. I recommend re-reading their terms to get familiar with WHAT you get cash back on and how much that % is so you can decide what the best times and places to use the card are.
  4. Be aware that applying for a new credit card dings your credit. If your credit is in delicate balance, consider holding off for a while before applying for the new card (if we have to apply at all. Those details are still being determined).
  5. Compare it with other cards. If you are a “shop at Costco once every 6 months” family, I probably wouldn't get a Costco card (unless the benefits for purchases made outside of Costco outweigh other cards on the market). Don't do it just because you feel like you're supposed to. Compare with other cards and really weigh the worth before committing.
  6. In general…go with a card that has CASH rewards, and not FLIGHT rewards. This is just a generic credit card tip while I'm at it. As tempting as it is to get a card that provides flight miles (“because it will force us to travel!”) there is so much red tape and restrictions with them typically. Plus, you are so limited! Our philosophy is to get cash rewards and use them for travel (or whatever we want), HOWEVER we want! I cashed in my business credit card and got $600 for Europe, which was basically all our spending money. Anywhere we wanted. However we wanted. For FREE! (Well, kinda free, anyway. but you know what I mean.)
  7. Stay away from credit cards if you have pressing debt. To me pressing debt is something other than a reasonable mortgage that you can handle, and potentially a reasonable car payment depending upon your financial situation. If you have any other debt, consider holding off until that's taken care of. See my posts on DEBT for tons of tips.

UPDATE: Here's a fabulous comment from a Freeb, Danielle:

Freebs! I just chatted it up with AMEX to figure a couple of things out and boy did I learn a lot. So I was a little worried that once the partnership ended we might be charged an annual fee for the card. When I first applied for mine they said that your Costco membership essentially waived the annual fee. They informed me that no additional annual fees would be assessed. Whew. Then I asked if the cash back categories outside of Costco would remain the same and they said yes they would. Then the person chatting with me said that she would suggest applying for the Blue Cash everyday card because it has good cash back. When talking more with her about this I discovered that this was because your Costco/AMEX cash back can only be redeemed at Costco. Therefore, after the breakup you will still earn cash back but never be able to access it or redeem it. Which in my mind essentially makes the card worthless (though like Jordan said I will still keep it open to help my credit). So for me that was a huge deal and I though that the world should know. If anyone hears anything different from AMEX let me know, but I am almost positive that is the situation. Also, basically February will be the last time you can really redeem any of the cash back, even though the deal doesn’t end til April.

Love, Danielle

Thanks for sleuthing and sharing, Danielle!! XO

How do YOU feel about it?

How to shop at Costco - what to buy and what to avoid.

Well, thanks for asking! (…perfectly posed question purposefully placed so that I can get my loud-mouth opinions out to the world…) Now, this is where OPINION comes 100% into play.

Honestly, I trust Costco. I have seen and experienced first-hand how much their members are a priority. So while I'm bummed that they are breaking up because I truly love Amex (I'll explain why in a second), I have a hunch we will make out better for this deal. Heck, 4% instead of 3%? If they can pull off something like that, I'm an instant fan.

Now, I need to do my research and look into this new card when it comes out. But realistically it will most likely make sense for our family to get the new card because we pretty much only shop at 2 places: Walmart, and Costco. Is it annoying to apply for a new card, but we can handle a slight ding in our credit score (both of ours are in the 800's right now). But again, this is a very personal decision that it really just comes down to doing your research and weighing the pros and cons.

So…how do you know so much about Costco? And why do you talk about it so much? Do they pay you?

Use Costco coupons wisely and it will make all the difference!

Psshh, I wish they paid me! Heck, they don't even have an affiliate program. Costco doesn't know I exist, sadly. My dream of all dreams is to be their spokesperson someday; their Flo (Progressive commercials) of sorts, but in real life. But alas, they don't advertise, sponsor, sell, recruit, promote, or push anything. No need to! Those advertising dollars would have to reflect back on the customer and they would have to raise their prices, which would go entirely against their business model. So I guess it's a good thing. (Costco, I'd do it for free, you know! *shouted desperately, standing in the rain like in a dramatic teen romance movie*)

Why do I talk about it so much?

Honestly, I believe in the company. I respect it to the core. The prices and value, quality of products, customer service, how to they treat their employees, entire business model…slow clap. It's unmatched and unheard of. I just totally respect them. And honestly, a lot of what I share (and what I get the most questions about) has to do with what WE do as a family. We shop at Costco, so I'll tell you all about it when we do.

How do I know so much? Easy.

I pay attention. And Ask.

I basically ask a new question every time I go. I read articles on it, watch TV segments on it, and even got a personal behind-the-scenes tour from a Costco GM who saw me talking about Costco on the news and wanted to give me info that is not easily found. (Yes, it was like Disneyland for me!)

Over the years I've become the resident Costco expert and have been interviewed in articles, on TV, and even in Magazines about it. Oh haaaaaay, Women's World!

Women's World magazine article about costco

So there you go! Hope that was helpful. If you need to know anything about Costco feel free to ask. If I don't know it off-hand, I'm happy to find out.

Be sure to check out my COSTCO PAGE to get all my best tips in one place.

If you like what you see, be sure to SUBSCRIBE to my email list so you don't miss a thing, and follow me on Instagram, Facebook, and Periscope (@FunCheapOrFree) for daily tips and tricks.

Hope you have a great Tuesday!

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Comments

  1. Freebs! I just chatted it up with AMEX to figure a couple of things out and boy did I learn a lot. So I was a little worried that once the partnership ended we might be charged an annual fee for the card. When I first applied for mine they said that your Costco membership essentially waived the annual fee. They informed me that no additional annual fees would be assessed. Whew. Then I asked if the cash back categories outside of Costco would remain the same and they said yes they would. Then the person chatting with me said that she would suggest applying for the Blue Cash everyday card because it has good cash back. When talking more with her about this I discovered that this was because your Costco/AMEX cash back can only be redeemed at Costco. Therefore, after the breakup you will still earn cash back but never be able to access it or redeem it. Which in my mind essentially makes the card worthless (though like Jordan said I will still keep it open to help my credit). So for me that was a huge deal and I though that the world should know. If anyone hears anything different from AMEX let me know, but I am almost positive that is the situation. Also, basically February will be the last time you can really redeem any of the cash back, even though the deal doesn’t end til April.

    Love, Danielle

    • We have the blue cash everyday and our rewards are 6% cash back for groceries (at true grocery stores not super Walmart or super targets etc) and 3% on gas (but not at grocery store gas stations…tricky). It is really awesome! We can’t use it at Sam’s (only store in our area not Costco) but it still is so worth it for the half of groceries we don’t get at the wholesale store! I heard about changes in Sam’s (and Costco) credit cards so we’ve held off applying so far but our rewards from this cash back card have been $40 in 3 months already. (Our grocery store, Hy-Vee, price matches everything too.) It really is worth looking into the details of the rewards and only using each card at its highest potential rewards back!!

      • 1. Do you know if they count Aldi as a grocery store because other than Costco that is where I do my shopping. 2. SAY WHAT I didn’t know HI-Vee price matched?! There is a brand new one opening up right by my Costco! That makes me super excited. Is price matching there difficult, like do you need the other adds with you or are they really good about it?

        • It is up to the store. But generally YES you do need the ads. I prep before I leave the house (sadly deals to meals has few stores for my area!) and have the pages marked so it still goes fast. I am not sure because we don’t have an Aldi nearby, but call Amex customer service! We called before signing up (or maybe it was live chat online) and they asked the description etc of Hy-Vee and were able to verify it would qualify. I’m sure Aldinprobably would but always check first! 🙂

      • I checked on the American Express website and it shows that the Blue Cash everyday card that was referenced in the article only gives you 3% cash back at supermarkets with no annual fee. The Blue Cash Preferred Card from American Express gives you 6% cash back at supermarkets but it charges a $75 annual fee

    • Yes! Currently I love the Costco American Express, we also have the Chase Ink cards for our businesses. But I will let you know what I think of the Visa card once they release details about it!

  2. We got the new Blue Card”from AMEX. In 3 months of not many purchases we got $47.89 cash back credit on our card. I did learn you don’t get credit in grocery stores that are in strip malls. I shopped at a Sobey’s in a mall and when my statement came I called and the agent explained they do not recognize grocery stores in malls. Just an FYI for other shoppers.

  3. Hi Jordan!
    I was wondering if you’ve tried Boxed.com yet and what your thoughts were? It’s bulk shopping via the Internet & if you spend over $80 it’s free shipping (which is easy if you’re buying diapers, paper towels etc.) They have a limited variety of stock, but it’s usually the most popular brands.

  4. Do you know of anyone who offers insides into SAMs club as you do for Costco? We sadly have no Costco in our area. I know a lot of the tips you offer would work at SAMs too, as it is a similar big box store, but I wonder about things like the members mark brand vs Kirkland, and their personal business model, the new partnership with discover, etc.
    thanks!

  5. I am looking forward to the new Costco Visa card as well. One thing I am confused about is Sam’s Club just recently joined forces with mastercard with cash 5% back on gas and 3% cash back on travel and out to eat with 1% cash back on everything else. Are they going to joined forces with discover again? I have not heard of this 3% cashback with Discover card at Sam’s Club

  6. Also I checked on the American Express website and it shows that the Blue Cash everyday card that was referenced in the article only gives you 3% cash back at supermarkets with no annual fee. The Blue Cash Preferred Card from American Express gives you 6% cash back at supermarkets but it charges a $75 annual fee

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