Costco to Pay Almost Zero to Accept Credit Cards

[dualstow]

http://buff.ly/1zx7b2d  { Bloomberg }

Costco Wholesale Corp. has attained a goal that retailers have sought for years: near-zero expenses for credit-card payments.
In a deal with Visa Inc. and Citigroup Inc., Costco’s acceptance costs will be about zero, according to people familiar with the arrangement. That compares with the roughly 0.6 percent of each transaction the retailer pays its current partner, American Express Co. While Costco will still incur small fees on Visa cards issued by other banks, incentives from Citigroup and Visa will offset them, the people said.

[Lang]

Wow, 0.6% is a lot! Is there a similar expense for debit-card payments?

[Xan]

.6% is peanuts.  Isn't it something like 3% for normal retailers?

[dualstow]

Google says many retailers pay 1/3 to 1/2 more to American Express than to Visa.

[madbean]

Google says many retailers pay 1/3 to 1/2 more to American Express than to Visa.

That is also true. We only accept V,MC,Discover at 2%. If we want to add Amex, the fee for Amex would be around 3% as of my last quote IIRC.

With my Fidelity Amex I get 2% back so at 3% Amex would be pocketing 1%. At .6% on Amex, somebody's must really be taking a bath to pay the cashback.

[dualstow]

CostCo and Amex are of course parting ways.

Costco Wholesale Corp., the retailer that replaced American Express Co. as its credit-card issuer in Canada, is considering a similar move with its larger U.S. portfolio.

[madbean]

It's just not that straight forward. Amex doesn't get the whole 1% you refer to; it is shared with the merchant's processing bank and maybe other intermediaries. Also, Amex makes money on interest, fees, co-branded offers and other avenues.

They've never gotten a penny in interest or fees from me so I have to believe that at .6% my 2% cashback account is an overall losing proposition. I wouldn't be surprised to get a notice in the mail that things are going to be changing if this keeps up.

[dualstow]

I wouldn't be surprised to get a notice in the mail that things are going to be changing

All you have to do is look at the post above yours to know that they are.

[Xan]

Sometimes (often?) the cashback that you get varies.  It may be you get no cashback at Costco.

[madbean]

Sometimes (often?) the cashback that you get varies.  It may be you get no cashback at Costco.

Cash-back on my Fidelity Amex doesn't vary at all. It's been 2% on every thing since I've had the card, for about 5 years now. I use it wherever I can and have been averaging about $700/year since I've had it.

If they decide the cash-back amount will vary depending on the merchant or the type of purchase that will be a big change. If it isn't going to stay consistent then I may have to start looking into the cards that have promotional offers like a lot of people do. So far I've heard nothing from Fidelity Amex about it however.

[dualstow]

That's true. The Fido Amex pays 2% as long as the cash back goes into a Fidelity MySmart account. I have heard that people who opt for credit toward the bill instead get 1%, but I've never tested that.

[WiseOne]

I've been looking into Instacart, and in my area you can use it to order from Costco without the need for a Costco membership (!).  And the $3.99 delivery fee is a much better deal than the $12 car service or the $18 parking. 

Not only that, but I can pay for the Instacart order online with my Blue Cash Amex card.  From what I've read, Instacart purchases come up as grocery.  This should let me get the 6% cash back on the entire order, including anything from Costco.

This whole thing seems almost too good to be true.  I can't wait to try it out.

[dragoncar]

It's just not that straight forward. Amex doesn't get the whole 1% you refer to; it is shared with the merchant's processing bank and maybe other intermediaries. Also, Amex makes money on interest, fees, co-branded offers and other avenues.

They've never gotten a penny in interest or fees from me so I have to believe that at .6% my 2% cashback account is an overall losing proposition. I wouldn't be surprised to get a notice in the mail that things are going to be changing if this keeps up.

I've had a number of lucrative rewards cards "upgraded" to crappier rewards.  You don't really have a choice in the matter, since the alternative is to close the account.  Even for losing propositions, they probably figure you are recommending the card to friends, and might someday miss a few payments.

[madbean]

I've been looking into Instacart, and in my area you can use it to order from Costco without the need for a Costco membership (!).  And the $3.99 delivery fee is a much better deal than the $12 car service or the $18 parking. 

Not only that, but I can pay for the Instacart order online with my Blue Cash Amex card.  From what I've read, Instacart purchases come up as grocery.  This should let me get the 6% cash back on the entire order, including anything from Costco.

This whole thing seems almost too good to be true.  I can't wait to try it out.

Sounds like a great service for someone living car-less in a place like NYC. Always wondered what that would be like without being able to drive to the grocery store and come home with bags full of groceries.

[WiseOne]

I've been looking into Instacart, and in my area you can use it to order from Costco without the need for a Costco membership (!).  And the $3.99 delivery fee is a much better deal than the $12 car service or the $18 parking. 

Not only that, but I can pay for the Instacart order online with my Blue Cash Amex card.  From what I've read, Instacart purchases come up as grocery.  This should let me get the 6% cash back on the entire order, including anything from Costco.

This whole thing seems almost too good to be true.  I can't wait to try it out.

Sounds like a great service for someone living car-less in a place like NYC. Always wondered what that would be like without being able to drive to the grocery store and come home with bags full of groceries.

We have ways to deal with it.  We don't shop like you do in the suburbs - typically you buy what you need only when you need it, and you have relatively small fridges and kitchens so you don't store a lot of stuff.  I did manage to find space for bulk purchases, but you have to be choosy about what you buy in large quantities.  Also it helps to have one of those "granny carts".

Companies like Instacart and Fresh Direct are a godsend for people in the suburbs, too.  I introduced my mother to Fresh Direct and she's thrilled.  She's almost 80 years old and spends her days taking care of my severely disabled father, and going to the grocery is an increasingly difficult chore.  Having delivery services available is going to make a big difference in how long she will be able to remain at home in an otherwise car-dependent suburb.  My mother is fiercely independent and she will never voluntarily leave her home for assisted living, and I can't say that I blame her.  Frankly this is one reason why New York City is not at all a bad place to call home; between full service elevator buildings and the ubiquitous delivery services, you can consider Manhattan to be one huge assisted living center.

[dualstow]

I buy most of my food at a farmer's market that comes to a park literally one block from my home. Even the grocery store isn't that close, but it's walking distance. Separate and equally walkable bodegas for coffee, beer, kimchi, bread, cheese, the essentials of life.

(madbean) Always wondered what that would be like without being able to drive to the grocery store and come home with bags full of groceries.

[Libertarian666]

I've been looking into Instacart, and in my area you can use it to order from Costco without the need for a Costco membership (!).  And the $3.99 delivery fee is a much better deal than the $12 car service or the $18 parking. 

Not only that, but I can pay for the Instacart order online with my Blue Cash Amex card.  From what I've read, Instacart purchases come up as grocery.  This should let me get the 6% cash back on the entire order, including anything from Costco.

This whole thing seems almost too good to be true.  I can't wait to try it out.

Sounds like a great service for someone living car-less in a place like NYC. Always wondered what that would be like without being able to drive to the grocery store and come home with bags full of groceries.

We have ways to deal with it.  We don't shop like you do in the suburbs - typically you buy what you need only when you need it, and you have relatively small fridges and kitchens so you don't store a lot of stuff.  I did manage to find space for bulk purchases, but you have to be choosy about what you buy in large quantities.  Also it helps to have one of those "granny carts".

Companies like Instacart and Fresh Direct are a godsend for people in the suburbs, too.  I introduced my mother to Fresh Direct and she's thrilled.  She's almost 80 years old and spends her days taking care of my severely disabled father, and going to the grocery is an increasingly difficult chore.  Having delivery services available is going to make a big difference in how long she will be able to remain at home in an otherwise car-dependent suburb.  My mother is fiercely independent and she will never voluntarily leave her home for assisted living, and I can't say that I blame her.  Frankly this is one reason why New York City is not at all a bad place to call home; between full service elevator buildings and the ubiquitous delivery services, you can consider Manhattan to be one huge assisted living center.

And you get "free" tax harassment too, which makes the IRS look friendly!
(Note: I lived in NYC, although not in Manhattan, for a number of years in the 1980's, and in NYS for about 15 years in total.)

[WiseOne]

Yes, the taxes are no fun.  It's definitely a better deal to live here while retired.

[Libertarian666]

I can't imagine living there again in any circumstances, retired or otherwise.
However, it is a nice place to visit!