Amazon's Incredible New Credit Card Could Disrupt Costco

By John Richardson in New Features
Amazon's Incredible New Credit Card Could Disrupt Costco

Amazon Stores continues to focus on innovative marketing programs that will enhance the experience for both their buyers and seller. This is the reason we feel that having your own Amazon Store is one of the best decisions you can make to be successful online.

Amazon's new credit card offers an impressive 5% cash back on Amazon.com purchases.

Rachel Graf | Jan 13, 2017 11:06 AM EST

Amazon's (AMZN) improved credit card rewards program could be trouble for Costco (COST).

The e-commerce giant announced Wednesday a Visa credit card that offers Prime members 5% cash back on all Amazon.com purchases. Costco's Visa Anywhere cards, issued by Citigroup (C), offer just 2% cash back on Costco purchases.

But Costco's cards do offer better incentives for gas, restaurants and travel purchases than do Amazon's.

Costco grants 4% back on gas, 3% back on restaurant and eligible travel purchases and 1% back on other purchases. Amazon's cards, issued by JPMorgan Chase (JPM), will grant 2% back at restaurants, gas stations and drugstores and 1% back on other purchases, the companies said in a joint statement.

Neither of the cards have annual membership fees.

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About 8.5 million of Costco's 87 million members had signed up for the Visa Anywhere cards as of the fiscal 2017 first quarter, CFO Richard Galanti said on a conference call at the time.

Amazon doesn't disclose Prime membership figures, but estimates range as high as 69 million. Every Prime member who held Amazon's previous credit card will automatically be upgraded to a Prime Rewards Visa Card.

Costco's card is "great" for "driving member value and sales over the next years and of course lowering our effective merchant fees related to the new program," Galanti said on the company's most recent earnings conference call.

Last year, Costco ended its longstanding partnership with American Express (AXP) in favor of the Visa Anywhere cards' increased cash back rewards and lower merchant fees.

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