With Costco and AmEx splitting, don't rush to switch cards
By Tony Mecia
Dear Cashing In,
I have the True Earnings card from American Express and Costco, but I read last week that those two companies are ending their partnership. Should I cancel that card and apply for something else? -- Joyce
It is true that American Express recently announced that the partnership between it and discount wholesale club Costco is ending. Under that arrangement, Costco only accepts American Express cards -- and the two companies offered the True Earnings card (no annual fee with paid Costco membership). The card gives 3 percent cash back on gas, 2 percent back on restaurants and travel and 1 percent on all else. The cash back is in the form of coupons for use at Costco.
Costco and American Express apparently could not make the arrangement work financially for both of them. Costco is exploring a partnership with other card companies, including Chase and Citi, according to the Wall Street Journal.
An important point here is that nothing will happen until early 2016, so there is no rush to do anything differently at this point. The partnership agreement runs until March 31, 2016.
In fact, waiting can be the smart move, because you might have a couple different banks trying to woo you with sign-up offers.
We see these types of card partnerships end regularly in the airline industry, especially after mergers. Typically, the bank that no longer has the relationship with the airline will try to move its customers to a different travel card, while the bank with the airline relationship will send offers attempting to entice you to apply for a new card.
That could happen here. It would probably make sense for American Express to try to migrate you to one of its other cash-back cards, such as its Blue Cash Everyday (no annual fee) or Blue Cash Preferred ($75 annual fee), which offer extra money back at supermarkets, gas stations and certain department stores. An American Express spokeswoman did not return an e-mail last week seeking comment.
In addition, whichever bank partners with Costco will probably see you as a desirable customer and want you to apply for a card linked to Costco. They know you have a reliable history of shopping at Costco, so you would be a natural target of a marketing campaign, perhaps with some added incentives to entice you to switch.
Of course, you're not bound to either of those options. You can look around for other cash-back cards that interest you. One of the notable features of the True Earnings card is that, unlike some other retail or travel cards, it does not really give you extra incentives to shop at Costco. It doesn't give you extra cash back or other incentives for shopping there in the way that, say, Target's Redcard does, with 5 percent off purchases at Target.
That means that a regular cash-back card from another bank could give you close to the same rewards you currently enjoy on the True Earnings card, depending on where you spend your money.
If I were you, Joyce, I would start looking around at other cash-back cards on the market. Before deciding on one, see what American Express proposes to offer you and find out what Costco's new partner is going to offer. News reports say Costco is close to announcing a new partner.
Then take the information and make an informed decision.See related: Poll: Wealthy cardholders prefer cash-back rewards, Which credit cards earn the most reward points at Wal-Mart?
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
Published: February 24, 2015
- Reward possibilities soar with Starwood-Marriott merger – If you have points with either of the big chains, you have some great opportunities to take advantage of the rewards ...
- Using rewards miles to fly to Cuba – While there are still restrictions on travel to Cuba, it has cracked open as a travel destination for Americans, and you can use rewards to get there ...
- Hotel rewards: Go for free nights, not points – While thousands of points might feel like a bigger sign-on bonus than free nights for a hotel credit card, they make for more complicated trip-planning and run the risk of being diluted ...