Costco's credit card nightmare just got even worse

Costco’s marriage to Visa has been rocky pretty much from the start. And this weekend, shoppers faced a new problem despite assurances that issues in the relationship were being ironed out.  

On Friday evening, a number of Costco members received emails from Citi, the issuer of the new Visa-Costco credit card, alerting them that their credit card accounts had been closed. In at least some cases, members reported that they received emails addressed to other people that contained the last four digits of other users’ account numbers, raising concerns that their accounts had been hacked. 

The emails represent another speed bump in Costco’s transition from American Express to Visa as its card of choice. The move, finalised in June, impacted 11 million Costco members. Since then, users have threatened to cancel their memberships due to ongoing issues. 

Citi told Business Insider that Friday’s emails were intended to be sent to Costco shoppers whose memberships had lapsed to alert them they could no longer use their Costco Anywhere Visa cards. However, due to a systematic error, a number of active Costco members received emails intended for other card holders. 

Citi said the users’ accounts were not compromised in any way and the mistake only affected a small percentage of Costco members.

Those impacted by the error took to social media to complain: 

Costco members said that they were forced to wait more than 30 minutes to speak to Citi representatives about their accounts on Friday and Saturday. 

On Saturday evening, Costco emailed all customers who were impacted instructing them to disregard prior “email(s)” regarding the Costco Anywhere Visa. 

“Your account and the cards for any existing authorised user(s) are open and available to use,” the email reads. “We apologise for any concern or inconvenience this may have caused and please be assured your account has not been compromised.”

The transition from the TrueEarnings American Express Costco card to the Costco Anywhere Visa card has been a longer process than anticipated.

“We’re working through that,” CEO Michael Corbat said of the transition in a call with analysts, after reporting second-quarter earnings in July. “We’re gaining on it. We’re very focused on it. We’ve got a lot of resources deployed against it, and it’s something we can fix in the short order.”

According to Corbat, Citi faced “extremely high calling volumes” from customers with questions about card activation, statements, and payments.

Citi’s inability to respond to customer questions was one of the biggest problems in the Costco credit card transition in late June, with members facing long wait times and dropped calls while waiting to speak with Citi customer-service representatives.

“Worst credit card transition ever — 4 hours and counting on the phone with Citibank and they still can’t get my cards to me,” one Costco member wrote on Facebook. “Saving money isn’t worth alienating your members … seriously rethinking my patronage.”

Customers complained in June of not receiving their new Citi Visa cards in the mail and not being able to use corporate American Express cards at Costco, following the switch to making Visa the retailer’s exclusive credit card partner. They have also complained about charges being flagged as “fraud” and that the transfer of rewards dollars has been lower than expected.

Despite the complaints, Citi says the swap has been an overall success.

Citi reported more than 337,000 new account acquisitions to date since the switch — a number that significantly exceeded Citi’s expectations. Purchase sales on Costco Visa co-branded cards totaled $5.7 billion in the three and a half weeks following the transition, according to Citi. 

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