Costco & Citi Form Partnership
Last month I wrote about Costco and American Express ending their 16 year partnership. The news was a big blow to American Express (and their stock price) and left many wondering who the giant retailer would partner with next.
When a similar deal ended recently in Canada, Costco chose to partner with Capital One and Mastercard. I thought it may be reasonable that they would do something similar here, although Capital One just never seemed like a great fit.
A New Partnership Announced
Today Costco has announced that they will be partnering with Citi and Visa beginning on April 1, 2016. According to the press release, “Under the terms of the agreements, Citi, the world’s largest issuer of consumer credit cards, would become the exclusive issuer of Costco’s co-brand credit cards and Visa will replace American Express as the credit card network for Costco in the United States and Puerto Rico beginning April 1, 2016.”
In regards to the new co-branded credit card, “Once issued, Costco’s co-brand Visa credit card would provide generous rewards to Costco members, serve as the Costco membership card, and would be accepted at Costco locations in the United States and Puerto Rico, as well as all merchants worldwide that accept Visa credit cards.
Last month when the news broke I also speculated that American Express might re-brand the current Costco cards to one of their own products. It seems that was incorrect and Costco has confirmed that Citi will purchase the existing co-branded credit card portfolio. “The implementation of these agreements is subject to the purchase of the existing co-brand credit card portfolio by Citi.”
Since Sam’s Club has partnered with Mastercard here in the United States, this move doesn’t come as a huge surprise. Unlike Chase, Citi has struggled to pick up more affluent clients, so this seems to be a good move for them and one they no doubt paid a lot of money for.
I am a little surprised that the entire co-branded credit card portfolio is being sold by American Express, although this was probably stipulated in their original contract. If you currently have the co-branded card, look for American Express to encourage you to apply for another one of their products before the end of the contract.
This is an interesting move for Costco and one that I think is a net positive for members. Since most people carry a Visa card in their wallets, this makes shopping at Costco more convenient. I am really interesting to see how generous the co-branded card will be. I suppose we will have to wait awhile before we hear more.
HT: FlyertalkerinA2 on Twitter