Costco switches to MasterCard in Canada

[oneh2obabe]

One of Canada’s biggest retailers is switching credit card providers after negotiations with its current supplier broke down.

Costco Wholesale Corp. says it will stop accepting all American Express Co. cards in its 88 Canadian stores, starting Jan. 1.

The U.S. based warehouse club retailer said it would begin accepting MasterCard instead.

“This is a huge opportunity for MasterCard and Costco to increase membership, offer more value, better benefits and increased savings for cardholders and Costco members,” MasterCard Canada president Betty DeVita said in a statement Thursday afternoon.

More details about the new cards will be available in the coming weeks, the MasterCard statement said.

Costco members that have the current TrueEarnings or American Express Platinum Cash Rebate card will continue to earn cash rebates on those cards until Dec. 31, 2014, Costco Canada said.

Costco said its ending its relationship with American Express after talks to renegotiate its agreement broke down. No further details were provided.

“The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires on Dec. 31,” Lorelle Gilpin, vice president of marketing and membership for Costco Wholesale Canada, said in an email to Canadian customers.

“The terms of the contract were up, AmEx and Costco entered into negotiations and were unable to come to terms,” David Barnes, a spokesman for AmEx in Canada, said in a phone interview with Bloomberg.

AmEx is currently the only credit card Costco accepts in its stores.

The move affects only Costco’s Canadian stores. Its U.S. stores will continue to accept most AmEx cards.

Industry observers said they suspect merchant fees were the sticking point in the negotiations between AmEx and Costco.

A growing number of retailers have been pushing back against their credit card suppliers, saying the processing fees are getting out of control.

Costco’s gross profit margins are much slimmer than most retailers, as little as 15 per cent or less, so any increase in credit card fees would hit them harder, industry observers said.

AmEx’s merchant fees are generally higher than either Visa or MasterCard, though Costco likely had a special deal because it offered AmEx exclusivity, observers said

“Costco has some of the smallest margins in retail,” said Alex Arifuzzaman, a principal in retail consulting firm InterStratics. “Half a percentage point increase (in merchants fees) increase would be a bigger deal to Costco than to other retailers.”

The Costco relationship represented a “sizable portfolio” for AmEx in Canada, Barnes said, without elaborating.

Costco Canada is one of Canada’s biggest retailers with estimated sales of $17.8 billion in 2013. Each store has about 110,000 members.

AmEx Canada said it planned to aggressively market its new cash-back card to Costco members as well as other Canadians as an alternative to the co-branded Costco card.

http://www.thestar.com/business/2014/09 ... anada.html

[Captain Awesome]

Oh, that's why my Mastercard stock went up by 2% today...

[Bsuds]

I hope we get as good a deal or better from Mastercard as we did from Amex.

[matai]

Each store has about 110,000 members.

That's 85 stores X 110,000 = 9,350,000 Canadian members? Or 25% of the population including children? Sure.

[JLives]

All the members don't shop at the store at the same time. She said about, some have more or less. Considering everyone from the Kooteneys to the South Okanagan to the Shuswap shops at Kelowna Costco I can easily see that number being accurate here.

I do wish they had picked Visa though. Guess I'll stick to debit.

[matai]

Traveling from the Kootenays?

[JLives]

That depends on what you are buying. I have been a Costco shopper for years and I have it down to an art now. Superstore doesn't hold a candle to them for meat and cheese for one.

[Captain Awesome]

I've seen people from Grand Forks coming up and loading pickup trucks with food and goods at Costco.

[JLives]

We have family and friends in Nelson who make several trips a year to stock up.

[LoneWolf_53]

Traveling from the Kootenays?

Yes they do. There's this thing that was invented called the automobile which allows consumers to shop far and wide.

Imagine!

That depends on what you are buying. I have been a Costco shopper for years and I have it down to an art now. Superstore doesn't hold a candle to them for meat and cheese for one.

Same here. Been buying there for years but one has to be smart and know what is a good buy and what is better sourced elsewhere.

Next to impossible to beat their Pharmacy prices so for some that alone justifies the cost of membership. Pickles and TP are a good deal too, in addition to their meat and cheese.

[Bsuds]

There are just so many items that are either cheaper or better quality at Costco it more than pays for the membership cost.
Will have to wait and see what if any benefits there will be with a mastercard. We originally got the AMEX for the extended warranty and convenience when buying big ticket items.

[matai]

CardMaster usually doubles the manufacturer'S warranty, for free.

[Smurf]

Prescriptions alone, in fact some of the over the counter drugs lone pay for our membership. I use the Kirkland Back pain tablets, basically Tylenol and save a fortune. I find they work better than Tylenol and know others who say the same. My doctor told me it is likely due to the carrier they use. In other words everyone would be different, but for me they are definitely the best and by far the cheapest.

We love Costco.

[matai]

I can't wait for them to sell beer, then I'll get a membership.

In the meantime their hot dogs and pop deal is unbeatable.

[Glacier]

The main reason I let my membership lapse 6 or 7 years ago is because they wouldn't take Mastercard. I think I may sign up for Costco again because of this news.