Without Amex by its Side, Costco Looks to Visa & Citi for Co-Branded Cards

Costco Wholesale Corporation has announced that it will enter into a new, co-brand credit card program agreement with Citi, and an acceptance and co-brand incentive agreement with Visa. The implementation of these agreements is subject to the purchase of the existing co-brand credit card portfolio by Citi.

Under the terms of the agreements, Citi, the world's largest issuer of consumer credit cards, will become the exclusive issuer of Costco's co-brand credit cards, and Visa will replace American Express as the credit card network for Costco in the United States and Puerto Rico beginning April 1, 2016. Once issued, Costco's co-brand Visa credit card will provide generous rewards to Costco members, serve as a Costco membership card, and be accepted at Costco locations in the United States and Puerto Rico, as well as all merchants worldwide that accept Visa credit cards.

Costco will provide its members with additional information in the coming months regarding the anticipated transition from its existing co-brand credit card program. Earlier, we had reported about American Express discontinuing its merchant-acceptance and co-branded credit card agreements with Costco Wholesale Corp. The contractual agreement officially expires on March 31st, 2016. Amex cards will continue to be accepted at Costco’s 474 U.S. warehouses until then.

It was expected that Costco might go for multiple card brands like Visa and MasterCard, as most merchants do. Costco already accepts Visa and MasterCard debit cards. In Canada, Costco had established partnerships with MasterCard and Capital One Financial Corp. Costco had already ended its Amex co-branded card program in Canada last year, and Bloomberg had reported that Costco was considering a new US card partner.

The Costco-Amex card accounted for around $82 billion worth of Amex’s worldwide charge volume last year. Although Amex will have to face the charge-volume hit, the Costco business wasn’t that profitable in comparison to its other card programs. Ironically, 70 percent of Amex’s Costco cardholders conduct their spending outside of Costco stores.