Analyst: Costco's new store credit card could bring new members

Dive Brief:

The new Costco Wholesale store-branded credit card will be a nice switch for its members, according to Nomura Securities analyst Robert Drbul, cited by Fortune, and could bring the warehouse retailer much-needed new customers.
The new “Costco Anywhere Visa Card by Citi” membership card will be sent to members in May, and the old American Express membership cards will stop working at Costco after June. 19.
With the new card, Costco members recieve more cash back on gas, restaurant, and travel spending. Drbul said in a note that those benefits could help bring the card to the “top of wallet” for purchases outside Costco.

Dive Insight:

Costco has been seeing tepid growth in its memberships, reporting 1.9% growth in Q3 2015, its slowest in years.

The retailer is also in the process of switching up its store-branded credit card, dropping American Express after 16 years in favor of Visa. From last year until this month, there’s been a gap in sign ups that has dinged the retailer's results, with no more Amex cards being signed up at Costco, and no Visa cards to be signed up until this month. Costco in the meantime has been losing out on the finders’ fees it enjoys each time a shopper signs up for its store card.

More worrying was the wholesale retailer’s report last year that its membership base grew more slowly than it had in several quarters, with Q3 membership fees of $593 million falling short of the $621 million expected by analyst firm Cowen & Co. In some areas, Sam’s Club has given Costco a run for its money and members.

But now that more details are known about the card, it’s easier to see why Costco would take itself and its members through that painful process. The new card, which has benefits superior to other cards, especially when buying at Costco itself, will likely make its sticky members even stickier. And it could even end up being a new member magnet for Costco. In a blog post last week, Virginia C. McGuire at consumer financial review site Nerdwallet said the new Costco card is better than expected.

“If you’re already a Costco member, you really can’t go wrong with the Costco Anywhere Visa Card by Citi,” she wrote. “And if you’re not a member yet, this card is good enough that you might want to reconsider.”