Costco, Citi deluged by complaints in rocky credit-card rollout

Customers walk toward a Costco Wholesale store in Nashville, Tennessee, in 2015. CREDIT: Bloomberg photo by Luke Sharrett)

Costco Wholesale customers have flooded the retailer’s Facebook page with hundreds of complaints about a new credit card from Citigroup, saying they endured lengthy wait times and had trouble activating accounts.

Costco, the world’s largest wholesale club, told customers that the bank is working to deal with a deluge of calls about the new Costco Anywhere Visa cards. The cards were available for use starting on Monday.

“Due to high levels of interest in the Costco Anywhere Card and high volumes of calls from cardholders, callers to Citi should expect longer-than-desired hold times,” Costco said on the Facebook page. “Citi is reviewing processes and pulling in additional resources to alleviate hold times.”

Costco decided last year to end its 16-year relationship with American Express Co. after the firms couldn’t agree on card fees. Costco’s sales have slowed in recent months, disappointing analysts. One reason could be “friction” from the credit-card switch, Scott Mushkin, an analyst at Wolfe Research, said in a note to clients this month.

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Jennifer Bombardier, a spokeswoman for New York-based Citigroup, apologized to customers who were inconvenienced. She said Citigroup had issued 11 million of the cards and received 1.5 million customer calls by late Wednesday.

“Some customers experienced delays reaching customer service,” Bombardier said in an emailed statement. “Call volumes are starting to return to normal and we are working diligently to meet their needs. In addition to phone service representatives, we also provide online activation.”

Costco Chief Financial Officer Richard Galanti couldn’t immediately be reached for comment.

Citigroup, the world’s biggest credit-card lender, ranked second-to-last out of 10 companies in a J.D. Power credit-card customer satisfaction ranking last year. AmEx slid to second place behind Discover Financial Services after holding the top spot in the first eight years of the survey.

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Analysts have been counting on Costco’s new partnership with Citigroup and Visa to help the retailer cut costs. Morgan Stanley analyst Simeon Gutman estimated that 25 percent of Costco’s sales were made using the American Express card, which carried a fee of 0.6 percent, costing the company $180 million a year. With Visa, Gutman expects the fees to fall to 0.1 percent to 0.4 percent, saving $60 million to $150 million a year for Costco. He was looking for the company to use the savings to offer better deals to customers.