In a matter of days Costco went from hero to zero and almost back again. The cycle began when businesses throughout Puget Sound began receiving letters announcing a change in the way Costco would be handling business customers’ charge accounts.
Historically, Costco charged customers 1.65 percent of the total purchase, plus 21 cents per transaction. All that was about to change according to the letters.
Costco was lowering its monthly interest rate, the letters announced, and was eliminating the 21 cents per transaction fee. Instead businesses would be charged a flat rate of $240 a year.
It wasn’t just local business operators who found the new system unpalatable. Gloria Wol who sells consumer guides in New York City was among those who used the Internet to blast Costco.
“I was very disappointed,” she says, adding that she’d previously cancelled three different credit cards after receiving much the same news as she’d received from Costco. Dramatic changes in the conditions of doing business with a company such as Costco leave her feeling like a victim of bait-and-switch, she says.
“I thought I was finally safe with Costco,” she adds.
Costco President Jeff Brotman, the only authorized spokesman for the company, couldn’t be reached for comment. But an insider who asked not to be identified observed: “I don’t think the execs at Costco had thought the new charges through.”
Costco began thinking the changes through when it began hearing howls of protest from its regular business customers, and three days later modified the new terms.
What Costco came up with is more a delaying tactic than an about face. The new policy will apply to new customers immediately. Existing customers, on the other hand, will be grandfathered in and continue to pay what they used to pay—until the end of the year at least.
After the first of the year, Costco says, all accounts will be incorporated into the new system.