Attention Costco Shoppers—leave your Amex Card at home. The much anticipated, and drawn out, warehouse club switch from Amex to Visa becomes official on June 20. The Amex-branded Costco card cannot be used anywhere else starting then, so of those cards will be relegated to plastics recycling. Citibank’s Visa is automatically converted Costco Amex cardholders and has sweetened the perks for card spending as described in the following article.
In just over a month Costco (NASDAQ: COST) completes its long-in-the-works changeover from partnering with American Express (NYSE: AXP) to a new deal with Citigroup (NYSE: C) for Visa (NYSE: V) branded cards.
The transition which finishes on June 20th has a lot of moving parts which could confuse consumers. It’s not actually an overly complicated arrangement, but members of the warehouse club do need to understand what’s happening because as of the end of the day on June 19th, their old cards won’t work.
The good news for Costco customers holding an American Express card from the store is that they literally have to do nothing except watch the mail for their new card to show up. Information on the new cards began being sent out by Citigroup in April, according to a Costco Web page on the transition.
The likely competition over winning the deal also benefits consumers since the new cards offer better perks than the previous one. Members who hold the card (which has no fee, but requires you to pay Costco’s $55 annual membership charge) ups cash back on gas purchases from 3% to 4% (for the first $7,000 spent in a year, up from a $4,000 limit). It also increased givebacks from 2% to 3% on restaurants and eligible travel, while returning 2% cash back on all Costco purchases, and offers the same 1% American Express did on everything else.
Whether the newly acquired Costco customer base turns out to be a home run or strike out for Citibank remains to be seen. On the plus side, they gain a high spending group of consumers, and bonus points for knocking Amex out of Costco. The minuses are that they are giving out above average credit card perks, and receiving no transaction fees from Costco, according to some. Citibank is hoping the Costco Visa card becomes top of wallet at gas stations, restaurants and big ticket purchase locations. In any case, chalk this up as a big win for Costco shoppers.
Overview by Raymond Pucci, Associate Director, Research Service at Mercator Advisory Group
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