I’ve been a Costco member for only a few years now, however I have much experience with the company (my dad was a member of “Price Club” throughout the 80s before it merged with Costco in the early 90s; he has remained a Costco member ever since).
So with that background I’d like to publicly give some constructive criticism to Costco and their (open-minded) fan-base. I realize that Costco has the reputation of doing no wrong – that is, it seems no matter what they do, their membership base is unanimously satisfied that it’s the best possible thing for them and the company. Because of that, I feel even more compelled to publicly write this essay.
My primary complaint with Costco is in regard to what I’m calling their “payment monopoly.”
Simply put, Costco only accepts three forms of payment: cash, debit card, and American Express. However, earlier this year, Costco and American Express announced that they weren’t able to come to agreeable terms for an exclusive credit card agreement, so Costco shopped around and found that Citi Credit Cards was willing to agree to their terms. So, as of April 2016, Costco will continue to only accept three forms of payment: cash, debit card, and Visa.
As expected, the general buzz on the internet from Costco’s membership base about this decision is unanimously positive. Folks in social media are repeating the oft-heard mantra that they are “sure” that “Costco would only make the best decisions for its membership base.”
However I find it odd that a large international retail outlet would only accept one brand of credit card. I realize that many retailers only accept Visa/Mastercard/Discover (not American Express) or perhaps just Visa/Mastercard. But for a retailer with the breadth and scope of Costco to only accept American Express – or only Visa – feels a bit draconian. Is accepting this very limited form of payment really a “win” for the Costco member? Wouldn’t it be better to expand the accepted forms of payment so as to give the Costco member a broader choice of how (or whether) they want to pay for their purchases? My easily understandable assertion is that, yes – it would be!
However, I also understand how credit card processing works. I realize that retailers pay a percentage of each credit card purchase to card processors. By having an exclusive agreement with a card vendor, Costco has the ability to negotiate that percentage down as low as possible. In this sense, one could make the argument that Costco limiting their acceptance to one brand of card could be good for Costco’s bottom line and, in turn, its members. But is the answer really that simple?
Let me speak for myself here – I am a Costco True Earnings American Express cardholder, but I also carry a Citi Double-Cash Mastercard that earns me even more cashback than the True Earnings card. Personally, I’ve limited my spending at Costco because I don’t want the hassle of sending off a monthly payment to two different credit card companies. While I could certainly choose to use my debit card at Costco, I could also choose not to use it as well! My point here is that I have spent less money at Costco because of their very exclusive payment policy. By logical extension, I don’t think I’m alone.
So is this “Costco payment monopoly” ultimately a good thing for Costco and its members? If my own spending habits are any indication, then no – it’s not. But then again, I am only one man (and a family).
My desire is that Costco will one day be able to see that their payment monopoly is really a “company-centered” approach and not a “member-centered” approach to doing business. I also hope that Costco members can thoughtfully look beyond the blind acceptance that “all things Costco are always good” and spur their favorite retailer to improve upon its stubbornly-held practices – thereby improving the company and ultimately making life better for its members.
KobyWeb 