Co-branded credit card partnerships are among the most valuable relationships in payments, making transitions between issuers both financially significant and operationally complex. When a major retailer changes card networks or issuing banks, the impact extends well beyond consumers—it affects customer loyalty, transaction economics, and competitive positioning across the payments industry.
Costco’s transition from American Express to Visa illustrates the challenges of migrating millions of cardholders while balancing customer experience with contractual and technical considerations. The delay underscores just how important co-branded card programs have become for retailers, issuers, and payment networks alike.
Costco members are anticipating the pending switch from American Express to Visa as the warehouse club’s preferred co-branded credit card. Their wait will not end soon. Announced in early 2015, and targeted for a March 2016 hand-off, Costco says that the transition to Visa will now occur this June, and perhaps even later. It seems that Amex and Visa are wrangling over how the existing cardholder database will be handled, especially the critical issue of whether current Costco Amex cardholders automatically become Costco Visa cardholders.
Costco has delayed the transition from American Express to Visa cards for its customers, a move that has seriously hurt American Express.
Here’s a quick recap on the backstory: Costco signed an exclusive agreement with Citi in March 2015 that changed the company’s Costco-brand credit cards to Visa cards, ending its 16-year deal with American Express (NYSE: AXP). Costco customers will likely get new cards in June.
American Express’ stock has fallen 36 percent, from about $82 per share before the breakup was announced, to around $52 per share early this week.
Despite that, AmEx executives said the deal with Costco (Nasdaq: COST) was hurting business. American Express CEO Kenneth Chenault said in October that his company lost money every time a Costco customer swiped the card.
Costco credit cards represent about 10 percent of all American Express cardholders. That has been a big loss for the company.
It also shows the power Costco – the world’s second-largest traditional retailer – has over the companies with which it does business.
Costco’s switch to Visa will bring significant savings in credit card transaction fees, and a lot of pain to American Express. Now, delays in the transition raise questions as to why specific terms and conditions were not agreed upon at the deal’s inception. This credit card transfer from loser to winner may drag on through the summer, as there still appear to be issues to overcome. Meanwhile, Costco shoppers will still be wheeling out their overloaded shopping carts that make Costco the envy of the warehouse club retail world.
The Costco-Visa transition highlights the strategic importance of co-branded credit card partnerships and the complexities involved in transferring large customer portfolios. While retailers seek lower processing costs and better economics, issuers must carefully manage customer retention and portfolio migration to preserve long-term value.
Ultimately, successful card program transitions depend on minimizing disruption for cardholders while delivering meaningful benefits to all parties involved. As retailers continue to evaluate their payments partnerships, co-branded credit cards will remain a critical driver of customer loyalty and transaction volume.
Overview by Raymond Pucci, Associate Director, Research Service at Mercator Advisory Group
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