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article imageCostco's switch to Visa from Amex hits unanticipated challenges

By Nathan Salant     Aug 23, 2016 in Business
Issaquah - If it isn't one thing, it's another complicating discount retailer Costco's switch to Visa-branded credit cards from American Express.
Costco, the membership-only bulk discount seller with 500 warehouse-size stores in the United States and Puerto Rico and more than 90 in Canada, has stumbled repeatedly in rolling out new credit cards to its 11 million company cardholders.
On Friday, for example, the new card provider, Citigroup, mistakenly notified an undisclosed number of Costco card-holding customers that their accounts had been closed, according to Business Insider.
Then, card numbers included in the notices were also incorrect in many cases, raising customers' fears they had been hacked.
All that, combined with difficulties in reaching Citigroup over the weekend, led to a large enough number of Costco customers complaining on social media that it caught the retailer's attention.
Since the start of the program, customers have been turning to social media to voice their concerns. One Costco member posted on Facebook when the phone launched in June: "Worst credit card transition ever — 4 hours and counting on the phone with Citibank and they still can’t get my cards to me."
Citi said user accounts were not compromised and that the mistake affected only a small percentage of Costco members.
But many users were so outraged by the problems that they threatened to cancel their Costco memberships, Business Insider said.
“Saving money isn’t worth alienating your members … seriously rethinking my patronage," the Costco member said.
On Saturday night, Costco again emailed its credit card customers to tell them to disregard prior emails about their Costco Anywhere Visa cards
“Your account and the cards for any existing authorized user(s) are open and available to use,” the email said.
“We apologize for any concern or inconvenience this may have caused and please be assured your account has not been compromised,” the message said.
Citigroup conceded in July that the transition from the TrueEarnings American Express Costco card to the Costco Anywhere Visa card that began in June had not gone as quickly or as smoothly as the company had planned.
“We’re working through that,” Citigroup CEO Michael Corbat said in a call with analysts after reporting the company's July earning.
“We’re gaining on it; we’re very focused on it," Corbat said. "We’ve got a lot of resources deployed against it, and it’s something we can fix in the short order," he said.
Corbat apologized for any delays and said Citi has been facing “extremely high calling volumes” from customers with questions about the new cards.
But the failure to respond to customer questions was already a big problem when the credit card transition began in June, with company representatives forced to leave customers on hold for long periods.
Yet despite the problems, Citi says the switch to Visa has been an overall success.
Citi reports opening more than 300,000 new accounts since the switch-over — significantly more then expected — and said Costco customers had spent $5.7 billion in the first four weeks since the transition.
More about Costco, Credit cards, American express, Visa, Customers
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