When Costco (NASDAQ:COST) and American Express (NYSE:AXP) announced that they were going their separate ways last year, with the warehouse chain soon beginning to accept only Visa (NYSE:V) cards, it begged the question: How would American Express counter the fact that 10% of its outstanding credit card accounts stemmed from its one-time exclusive deal with Costco?
We now have an answer.
American Express has mailed out offers to Costco members promoting its Blue Cash Everyday Card. You don't even have to open the envelope to get a sense for how aggressively American Express is trying to stop customers from fleeing.
The outside of the envelope informs customers of two things. First, as of June 20, their Costco American Express Card will no longer work. By then, Costco customers should have received, and can begin using, their new Costco Anywhere Visa Card which will serve as a method of payment and grant access to the membership company's warehouses.
Second, in the largest font on the envelope, American Express is advertising that customers can earn $250 back as a welcome offer. To qualify, you must spend $1,000 in purchases on the card within the first three months. You'll then receive $250 reward in the form of a statement credit.
Just as importantly, the new AmEx card doesn't charge an annual fee. It also applies an introductory 0% APR for 15 months on purchases and balance transfers.
The card itself offers a slew of generous benefits, though not as generous as those offered by the Costco Anywhere Visa Card -- the latter explains why American Express CEO Kenneth Chenault said at the end of last year that Costco's new terms didn't make "economic sense for us and our shareholders."
Customers who sign up and use the card will earn 3% cash back at supermarkets (limited to $6,000 in annual purchases), 2% back on purchases of gas, 2% back at select department stores, and 1% back on everything else. These are similar to American Express' co-branded Costco card, though the soon-to-be-extinct card gave 3% cash back on gas, 2% back on travel and restaurant purchases, and 1% back on everything else.
Visa's new co-branded Costco card, by contrast, provides some of the most generous reward tiers in the credit card industry today. And unlike both of the American Express cards, it has four tiers as opposed to three. The top tier offers 4% back on gas. The second tier consists of 3% back on travel and restaurant purchases. Holders also receive 2% back on purchases at Costco or Costco.com. And the fourth tier includes 1% back on everything else.
From the rewards perspective, then, there's a lot to love when it comes to the new Visa card. However, and this is worth noting, the two cards aren't mutually exclusive. Particularly in light of American Express' generous introductory offer of a $250 statement credit on purchases of only $1,000, not to mention its 3% back on spending at supermarkets, you'd be excused for thinking that having both may in fact be the way to go.