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Costco’s New Visa Credit Card: Here’s What We Know

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Costco on Monday announced agreements with Citi and Visa to replace American Express as the exclusive co-branded credit card issuer and credit card network in its U.S. warehouse stores. The 16-year-old relationship between Costco and American Express expires March 31, 2016, so shoppers won’t begin to experience the effect of this change until next year.

At this point, there’s not a lot of information on what that change will look like.

What We Know

The agreement between Costco and Citi is contingent on Citi purchasing the existing co-branded card accounts — that’s something to be worked out between Citi and American Express. That transaction would mean existing cardholders will have their TrueEarnings Card from Costco and American Express replaced by the co-branded Citi Visa.

“Assuming the portfolio is sold, and hopefully it will be, Citi will just send you a new card,” said Bob Nelson, Costco’s vice president of investor relations. “Any balances will just transfer over to Citi.”

Emily Collins, Citi’s director of consumer public affairs, told Credit.com that Citi is not sharing any more details about the coming card other than it will begin offering the co-branded card beginning April 1, 2016.

Through next March, Costco will continue accepting American Express cards — it’s the exclusive credit card network in Costco warehouses — but come next April, anyone wishing to use a credit card in Costco will need a Visa.

American Express has a larger market share of U.S. credit cards than Citi (12.1% vs. 11.8% in 2013, according to February 2014 figures from The Nilson Report), but Visa accounts for nearly twice the purchase volume of American Express. In 2014, American Express’s U.S. purchase volume (transactions made with an AmEx) was $684 billion. For Visa, it was $1.21 trillion.

What We Don’t Know

Even though you don’t have to have the TrueEarnings Card to use credit at Costco, you still need an American Express if that’s your preferred method of payment. (Costco also accepts cash, check and debit cards in its stores, and it accepts other credit cards online.) Next year, instead of needing an AmEx, you’ll need a Visa, but Visa cards are much more common than AmEx ones.

Citi and Costco haven’t determined the structure of this new rewards card, but the offerings will have to compete with the cards already in your wallet. Nelson knows this, and he said Costco hopes to work with Citi to come up with a card that is not only better than other credit cards but better than other Visa cards consumers may be considering.

“There’s certainly lots of options out there on all kinds of credit cards, so hopefully the offer we have will be very competitive if not better than most out there, so we’ll see,” he said.

It’s also uncertain what the qualification standards for this card will be. You can still apply for a TrueEarnings Card (American Express has not yet announced when it will stop accepting applications), but because the Citi/Costco card doesn’t exist yet, there’s no way to know how hard or easy it will be to get.

Rewards credit cards are generally available to applicants with good or excellent credit and are best used by people who pay their statements in full each month. Rewards cards tend to have higher APRs, making them an expensive financing choice. Again, that’s just how these products tend to work — qualification standards, interest rates, rewards and other terms and conditions haven’t yet been developed for this new card.

Before you apply for a new credit card, no matter what kind it is, you should have an idea of where your credit stands, because you want to apply for credit you have a good chance of receiving. Each credit card issuer has different standards, and you have no way of knowing what credit scoring model they use to evaluate potential borrowers, so the best thing you can do is focus on what tends to affect your credit standing most: payment history and debt use. Make sure you’re paying debts on time and using a very small percentage of your credit card limits, and watch how this affects your credit scores. You can get two credit scores for free every 30 days on Credit.com.

At publishing time, the American Express TrueEarnings Card is offered through Credit.com product pages, and Credit.com is compensated if our users apply for and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment.

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  • http://blog.credit.com/ Kali Geldis

    That’s a good question! AmEx has not released details yet regarding how the card’s terms will change (if they do). We plan on following this story closely, and will be writing more as we get more information.

    Thanks for your question!

  • Wynn

    If you are a true earning credit card still, you will get offer from amex for either amex everyday or blue cash everyday. Both of them doesn’t have annual free. I got offer for amex everyday, but I called them up to get blue cash instead. They change it for you without question.

  • micadukey

    We can all bet the perks with Citi won’t rival the perks with AMEX. The whole deal is to reduce Costco’s discount rate, so you can be sure Citi’s margin will require them to squeeze out the differences from the consumer.

  • anonymous

    Will the balance on the AMEX transfer over to the new Citi Card?

    • http://www.credit.com/ Credit.com Credit Experts

      Check, but typically that would be the case.

  • Bryan Liads

    If my Annual fee for the Amex Card is due prior to the change to Citi will this annual fee carry over to Citi or will I be responsible for another annual fee?

    Also, how do these types of arrangements affect the consumer’s credit? I.e. Will the account history reflect the opening date of when I first opened the AMEX account and be retroactive or will it show this April 1, 2016 date on my credit report once the switch to Citi occurs?

    • Jeanine Skowronski

      You may want to contact the issuer to find out the specifics of how they are going to handle the transition. You should get a letter outlining the new terms and conditions of the card.

      Thank you,


  • http://www.credit.com/ Credit.com Credit Experts

    Costco’s current contract with American Express ends on March 31, 2016. It does not affect your ability to redeem the cash you have earned (if you receive the rebate check in your February statement.) We are not aware of any word yet on how purchases made in January and February 2016 will be handled as far as rebates, but by then it’s likely American Express will be offering a different product to current cardholders.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

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