business news in context, analysis with attitude

The New York Times is among several newspapers this morning reporting on a series of problems encountered by Costco as it has switched its credit card alliance from American Express to CitiVisa, saying that it seems to have turned into a "customer service fiasco."

On Monday, the Times writes, "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."

Since then, it "has logged more than 1.5 million customer service calls," and "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'."

While many retailers offer branded cards, the Times writes, "Costco’s is uniquely powerful. The company made sales of nearly $114 billion last year to its 81 million members. For nearly two decades, it accepted no cards other than American Express at its retail stores." But negotiations to continue the relationship fell apart with Amex decided the numbers did not add up.
KC's View:
I wonder if there is a degree to which Costco simply isn't used to having these kinds of problems with its customer service. It also seems to me that at some level, it may not have communicated effectively with its shoppers about the reasons behind the shift. The tenor of the complaints seems to suggest that people believe Costco did it so it could make more money ... and any effective communications program should have emphasized that Costco did it to save customers money. I'm a Costco customer, though I don't have one of its branded cards, and I cannot remember getting any sort of letter or email from the company.