prasha11

Costco to Pay Almost Zero to Accept Credit Cards, a MSing revolution?

http://old.seattletimes.com/html/ift...yndication=rss

http://www.bloomberg.com/news/articl...citigroup-deal

Julian Brennan

So what's the new information here? We all know that Costco has a lot of power to push their conditions onto almost every supplier. We all know that cost was the single most important factor in changing provider. That's why Walmart is building up intense pricing pressure for the big name brand suppliers like PG, PEP, KRFT, CLX etc. Some companies make 30% of their revenue from WMT so they have to give in. Same with Costco I suppose.

I don't see a connection to MS though...

Alcibiades

You like diamond rings ?

prasha11

The point, is this a trend setting event?

Why citi agreed to almost '0' profit? For such a large volume the cost of doing business cannot be ignored. The break even point can be large in net $s

ILGfly

If you read the Bloomberg article it mentions Amex was only getting 0.6%. Well below their normal rate. Not sure if you know this or not but I'll let you in on a little secret: CC companies make the vast majority of their money on interest charges.

Julian Brennan

They don't make money on the transaction fees, these only help cover the real fees of communication hardware and software and the actual network usage. Wasn't there a study saying that the average Costco credit card holder has so and so much balance on his/her card? That's where Citi will be making money @ a flurry rate of 8-24% APR and I figure that's why they wanted this deal so badly. I still don't see how this could help us in the MS game...

prasha11

depends, Will Costco introduce with Citi a re-loadable card like BB or RC?
Is Costco missing out the visa GC market?
Will we see the gift card rack near the cash registers at Costco?
Will they sell a 10 pack? or a 2K VGC?
Anything they do, may bring MSing to main street

LWT3

I predict that the answer to all of your questions is "no". Like the others who have responded, i see no implications for MS.

Father-of-3

The implication is more about returns. They probably won't card about issuing a refund to a devout card if they had no fees with the original purchase on CC. They have always been a nice place to return things.

HouFly

because this gets Citi guaranteed customer... Costco represents a huge consumer market share. for those that dont have a Citi card yet, and for those that do, this partnership brings the Citi card back into any given subset of Costco customers wallet. and the hope is that it's at the front of the wallet.

with a low transaction fee deal with Costco, Citi basically views this as a marketing cost and hopes consumers will continue using their Citi cards at other, everyday places where they can recoup their regular transaction fees even for those folks who dont carry a balance.

if you were a bank: would you pay $200-500 to acquire new customers (incld affiliate commissions to CC bloggers etc.) or lower your transaction fees to acquire guaranteed customers, without even a need for a sign up bonus? Citi's motto here is clear, the opposite of out of sight out of mind (ahem AMEX.) they wanna be front row center in your wallet.

Alcibiades

How is a annual fee based Members-Only store Main Street ?

BeyondtheWrap

Costco already sells gift cards. The news changes nothing.

uncommonsensical

all the time our customers ask us, 'how do you make money doing this?'

the answer is simple: Volume.

http://www.hulu.com/watch/2315

ZzzzX

Just bought one of those.

But I'm actually using it!

ZzzzX

It will help as soon as Citi reveals the signup bonus. I imagine the first round of signup bonus will be the highest.