Costco Replaces Amex with Visa

Updated on Apr 01, 2016

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Costco has chosen Visa to be its new credit card partner, ending a relationship with American Express that lasted more than 15 years. As you may know, if you’re a Costco shopper, the retail giant has a rather unique and limited policy regarding credit card acceptance.

Tremendous Savings but Limited Credit Card Options

While almost all retailers accept a variety of cards, Costco is a major exception. You can use most major credit cards at Costco, and the online Costco store accepts a few other types of credit cards. When shopping inside one of Costco’s brick and mortar stores, however, options are limited.

Costco sticks with one card exclusively, and will now exclusively accept Visa, but not MasterCard, making this a first for any retailer. After months of rather intense negotiations, American Express has said that it is no longer profitable enough for it to continue that partnership and Costco announced they will drop American Express.

A Powerful, Mutually Beneficial Partnership

The new partnership pairs two experienced and gigantic players. Citi, the bank that will issue the new Costco-branded Visa, is the largest issuer of consumer credit cards in the world. Meanwhile, Costco is one of the biggest retailers in the U.S., second behind Wal-Mart.

Starting in April of 2016, your Amex card will no longer work at Costco, but you will be able to use a Visa branded credit card. Costco will gain a significant market advantage through the partnership because it will now have direct marketing access to Visa’s customer base that totals more than 280 million people. American Express, by contrast, only has around 55 million cardholders.

Analysts believe Costco will reap huge financial rewards through this new partnership, since Visa normally charges merchants a much lower fee to process payments than Amex does. After the change was announced, the markets seemed to confirm that outlook because American Express stocks slumped, while shares of Costco and Visa rose.

Will Your Rewards Program Change?

Costco has not yet disclosed many details about the new card to be offered by Citi and Visa, although it did say it will be quite similar to the old TrueEarnings Card from Costco and American Express. The new card will also serve as a Costco membership card and will be accepted worldwide anywhere Visa is accepted.

The card is expected to offer an attractive rewards program especially for consumers who do a lot of shopping at Costco. Some of the perks of the old Costco Amex card being permanently phased out include: 3% cash back for gas purchases, 2% cash back for travel and restaurants, and 1% cash back on everything else. There card also came with no annual fee if the cardholder was a Costco member.

Do You Need a New Card?

How this impacts you as a consumer really depends on how attached you are to using your Amex card. Those who already carry a Visa as one of their primary go-to credit cards probably won’t notice any difference at all – unless the new Costco Visa offers more generous rewards.

If you’re not a current Visa cardholder, but you are a loyal Costco customer, then you still have almost a year to compare different Visa products to see which one is the best for you. You might consider waiting until more information about the new Costco card is available because it may turn out to be the best all-around choice for convenience and rewards for future purchases.

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