Making headlines on February 12th 2015; American Express and Costco will not renew their exclusivity contract which gave AmEx the sole credit card accepted at CostCo stores. The contract expires on March 31, 2016.
American Express Loses Contract
Both the co-branded TrueEarnings from CostCo credit card which is issued by AmEx and the exclusive credit card acceptance at their wholesale locations will end March 31, 2016. American Express issued a press releasementioning the failed contract negotiations and expressed the company tried to reach a contract renewal with the other party but felt the terms weren't favorable enough to constitute continuing the relationship. Instead American Express will look for other avenues to maintain revenue and growth that will appease shareholders.
Cardholders and CostCo members will still be able to use the TrueEarnings credit card until March 31st 2016 at which time they will receive notice by either mail or email that their card will expire and be offered a different one to replace it.
This news along with Bank of America and Merrill Lynch downgrading the American Express stock from buy to underperform sent their stock reeling by dropping more than 6% in value. The Wall Street Journal wrote an interesting article claiming this will have major ramifications across the credit card industry as the TrueEarnings card consists of one out of every ten card issued by AmEx, and they will struggle to replace that amount of card members.
CostCo Moving Forward
It is unclear at this time whether or not CostCo is in discussion with Discover, MasterCard, or VISA to bring their business as a sole payment option, or if they are willing to open up and allow more forms of payment options other than the membership card. One thing is for sure, CostCo is continuing to expand by building and opening more store locations across the United States.
1.American Express Comapny, (2015) "American Express and CostCo U.S. Partnership Agreements Set to End March 31, 2016" Retrieved February 13, 2015.
2.TheStreet, Inc. (2015) "American Express (AXP) Stock Lower Today After Bank of America/Merrill Lynch Downgrade - TheStreet" Retrieved February 16, 2015.