Costco-Visa Problems

by Raymond Pucci 0

Whoops. That would be the mea culpa theme of the Costco credit card transition from American Express to Citi’s Visa. Over a year in the making and with seemingly ample time to develop and execute a project plan, the first few days of the Visa handoff have been a series of missteps. As the following article relates, both Citi and Costco are working feverishly to resolve problems for thousands of unhappy customers.

The banner at the top of Costco’s Facebook page reads “Costco + Visa = ♥,” but for many customers, the first few days of the retailer’s new charge-card alliance have been anything but heartwarming.

On Monday, Costco took the final step in severing its 17-year relationship with American Express and began exclusively accepting Visa for credit card purchases at its stores. For more than 11 million customers, the switch meant cutting up their Costco-branded American Express cards and swapping them for a new Visa card issued by Citigroup.

A transition that executives promised would be seamless has turned into a customer service fiasco.

Citigroup has logged more than 1.5 million customer service calls, according to Jennifer Bombardier, a spokeswoman for Citigroup.

Costco’s social media pages are filled with thousands of scathing complaints. Many customers say their new cards have not yet arrived, and some report problems activating or using their cards or getting access to their accounts online.

The deluge of complaints swamped Citigroup’s call center, leaving some people waiting for more than an hour or unable to connect at all. A note on Citigroup’s website warns of high call volume and apologizes for “the long wait time that you may encounter.”

Costco has a loyal customer base and the store will work with Citi to ultimately right the ship. However, there are many moving parts to this transition and damage control will involve big capital and human resources, as well as an undetermined amount of time. Costco’s sales will take a hit for at least one quarter, and there will be customers switching to other warehouse clubs and retailers. With many shoppers still without their Costco Visa cards, it’s a return to the old days—where cash is again king.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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