Costco Switches to Citi and Visa in April 2016

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Follow-up on Costco dropping American Express. Costco has announced that it will only accept Visa credit cards at its stores starting April 1, 2016. American Express credit cards will no longer be accepted on that date. Customers can still use Visa and MasterCard debit cards, write checks, or pay in cash. Costco members can also still purchase Costco Cash cards online and then use those gift cards to make warehouse purchases.

Costco has also made a deal with Citi for their co-branded credit card. However, I don’t really understand this paragraph from an :

Costco hasn’t said yet whether people will have to reapply for its rewards credit card. Citigroup says it plans to make the transition from AmEx to the Citi’s Visa card as “seamless” as possible. Costco card holders probably won’t need to reapply, industry experts say. However, a small number of Costco card holders won’t be approved for a Citi card. American Express and Citi have different credit standards and a person who may have qualified under AmEx may not be approved under Citi.

I have never heard of anyone switching over issuers like that. I’ve seen people switch from one American Express flavor to another, or one Citibank flavor to another, but never from and American Express to a Citicard. To me, no reapplication means no new credit check on my report. We’ll have to see.

Based on this comment from someone claiming to be a Costco warehouse manager, my prediction is that the new Citi Costco Visa card will offer a tiered rewards system that offers something like 5% back on gas, 3% back at restaurants, and 1% back on everything else. They won’t do bonus groceries as they already sell that kind of stuff in the warehouse. Basically, slightly better than the old Costco AmEx rewards structure and closer to what Sam’s Club offers.

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Comments

  1. Interesting that you say, a small fraction of AmEx folks won’t qualify for Citi Visa. I always thought that getting approved for AmEx is difficult.
    Plus, I would also like to see if this Citi card will have annual fees like AmEx, because with AmEx we used to pay one fee for both, Costco as well as AmEx. Not too sure how this will go.
    Plus, for those who gets charged with membership fee in first 3 months, will it be charged? A lot of things to see.

  2. That would be a better tier than what Amex currently offers especially for gas.

  3. Jonathan, when Hawaiian Airlines switched from Bank of America to BarclayCard, Barclays bought the account portfolio from BofA.

  4. Baughman says:

    I’m sad that I’ll be losing my 2% cash back. I currently shop at Costco with the 2% Fidelity Amex. I also have the 2% Citi doublecash (Mastercard) and 2% Fidelity Mastercard (529). I don’t really have a good Visa right now, so I’ll probably sign up for whatever Costco and Citi agree to. Too bad I won’t be getting 2% at Costco anymore. Seems like a net loss to me.

    • Now that I think of it, it is the Schwab Visa, Priceline Visa, and Sallie Mae Visa that are no longer available to new applicants. I believe the current Fidelity Visa does 1.5% and then 2% after $15,000 in annual spending.

    • simplesimon says:

      I do the same with a Fidelity AmEx. Agreed that it seems like a net loss…shame.

    • What you could do is purchase Costco cash cards online with your Fidelity Amex and still effectively receive 2% cash back. Of course that way you’d have to prepay so it’s not for everyone.

  5. I guess a wait and see is in order…

    The last thing I want to do is have another credit card…

    Having the combined membership and card was a nice feature and let me easily track Costco spending…

    Another case of why are they fixing something that is not broken?

    • Joshua Katt says:

      Because it was broken for them (Costco)! The deal came-up for renewal and Citibank offered/cut their merchant processing fees lower than AMEX did. Plain and simple as that no matter what the marketing spin…

  6. If this happens, it will be the first time I have ever encountered a place that accepts Visa but not Mastercard.

    Chip

  7. michelle says:

    Am I right in thinking that either I’ll have to close the AmEx account and take the hit on my credit report or transfer to a new AmEx (assuming they want to keep card holders) and then pay an annual fee?

    Sounds less than great for card holders.

  8. Jonathon, as a long time reader, thanks for linking to my first comment ever in your post. For the sake of accuracy, I don’t claim to be a warehouse manager, just a manager at a costco warehouse.

    Costco wanted nothing more than to keep it simple for current members and cardholders by restructuring the Amex deal into something more competitive, but upon failing to come to terms taking a backseat to a rival was not an option. Supposedly the account transferring process is being set up as to have the slightest impact on credit duration, history, inquiries etc. as possible. As to how this will be achieved, I guess we shall find out shortly.

    Jim

  9. I think they’ll have to offer a pretty good deal for the co-branded Visa card if they want people to sign up for it…everyone has a Visa of some sort, but a lot of people signed up for the Costco AMEX because they didn’t already have an AMEX. I see a potential win for members.

  10. Hi Jonathan,

    I have had a Citi Mastercard since 2001 in addition to the Costco Amex. I rarely use the Citi card, but hold on to it because the potential hit on my credit score if I close it. With the change to a Costco Visa, do you think I can now close the Citi Mastercard without impacting my credit score? Also wondering if Citi will still consider me a cardholder from 2001 if I do that. Thanks!

  11. So it looks like Citi will indeed be purchasing the entire true earnings portfolio. Current cardholders will roll seamlessly into the new program with no additional credit pull or application process. Now that that has been taken care of for us, I just need to decide which Amex to apply for, as I can’t see leaving out a credit card that has been so good to me over the years.

    Jim

    • Interesting, thanks again for sharing. Off the top of my head my vote for favorite AmEx is the Starwood still; I just got 4 cents on per point value on another hotel booking, and otherwise you can earn 1.25 airline miles per dollar spent (5k bonus on 20k transferred at 1:1 basis). AmEx Preferred with 6% back at groceries is also good, or the AmEx Delta Platinum if you can take advantage of the free annual companion pass.

  12. As someone who works for Costco, the company gets a cut for each new AMEX signup and warehouse managers get a nice annual bonus based on their warehouse AMEX card signups. During monthly upgrade periods we’ve see less and less people who don’t have an AMEX. So by switching the card from AMEX to Citi and Visa, and getting members to get the new card, therefore erasing the slate and giving Costco 60 million more heads to make money off of.

    • Citi will buy the portfolio and you won’t have any new heads to make money off of.

      • That’s what people thought when AMEX took over. Costco doesn;t do anything without some sort of monetary incentive for themselves. Membership employees already been told that there no vacation time allowed in April 2016.

  13. Is there a pm function on this board? You’re struggling, we should chat.

  14. Costco Anywhere Visa® Card by Citi and/or Costco Anywhere Visa Business Card will start to be sent out to current AMEX Costco cardholders sometime in May 2016; and the old AMEX Costco credit card will no longer work on June 20, 2016. The new Citi Costco Visa credit card appears to be better: briefly, 4% back on worlwide gas (but not gas from convenience stores like 7-11, WaWa; grocery stores gas; Sams Club or BJ’s); 3% back on restaurants/ dining/ fastfood, travel..hotel, airfare, car rental, travel agencies, cruise lines; 2% back at Costco warehouse and costco.com; 1% back everything else. Details are at citi.com/credit-cards/creditcards/citi.action?ID=costco-terms# and in the WSJ. You cannot apply yet; probably have to wait for all card details closer to sometime in June 2016!

  15. Costco Anywhere Visa Card by Citi and/or Costco Anywhere Visa Business Card will start to be sent out to current AMEX Costco cardholders sometime in May 2016; and the old AMEX Costco credit card will no longer work on June 20, 2016. The new Citi Costco Visa credit card appears to be better: briefly, 4% back on worlwide gas (but not gas from convenience stores like 7-11, WaWa; grocery stores gas; Sams Club or BJ’s); 3% back on restaurants/ dining/ fastfood, travel..hotel, airfare, car rental, travel agencies, cruise lines; 2% back at Costco warehouse and costco.com; 1% back everything else. Details are on the net and WSJ.

  16. I do not want the new credit card , can I just get a membership card to get in and pay cash or use another visa card ?

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