Costco’s Debt-Pushers Drive Me Crazy
September 10, 2009 – 5:30 amI’m a big fan of Costco. For numerous reason I like Costco much better than Sam’s club, and the main reason is that Costco is all about value. I’m careful in that I make sure I’m not buying organic or “all natural” products when I just want the normal versions, but other than that small pitfall Costco consistently offers attractive prices for many of the items I purchase.
If there’s one thing I can’t stand about Costco, however, is their debt-pushing American Express love affair. I understand why they do it. They’re saving on transaction fees by only accepting American express credit cards. That doesn’t mean I have to like it though. Here are my major issues:
- The only credit card accepted at Costco as far as I know is American Express
- When you sign up for a membership, you’re offered an American Express card (which you can decline) that offers I think 3% cash back on Costco purchases
- When I was checking out last week, some dude came by and tried to pitch me again. “I noticed you were paying with your debit card. Would you be interested in…”. I cut him off before he could finish his please open a credit card routine.
By offering superior products at competitive prices Costco has earned my trust and respect. Why must they push a product that causes most people to stumble in their financial lives? I don’t blame Costco for accepting credit cards or offering them. I just wish a company as great as Costco would have the fortitude to extend past their core business and try to help their customers in other ways.
On that note I’m also a bit upset that they offer two membership types: “Executive” and “Gold Star”. Gold star memberships cost $50, and Executive cost $100. The thing that bugs me is that the executive member pays 2% cash back on all purchases (paid annually), and guarantees that you will earn back your $50. If you don’t they’ll cut you a check at the end of the year, IF YOU ASK! So I would guess that the average customer has no idea:
- whether or not they earned $50 back in a year.
- when their year started or ends
- how much they would need to spend there to earn $50. Let me do the math: $50/2% = 50/.02 = $2,500. You’ve got to spend $2,500 dollars to break even on this (assuming you forget to ask for you remaining funds back)! I’ve had some big shopping bills and Sam’s and Costco, but I don’t spend over $200 a month there. That’s half of my annual grocery budget.
They probably have a 20% redemption rate or less on this, and they therefore probably make a huge upside. Once again I’m not against Costco making money, I just don’t like the ways they go about it.
Am I off base on this one?
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