The Issaquah-based retailer said it has deals with Visa to replace Amex as its credit-card network, and with banking giant Citigroup to become the exclusive issuer of its co-branded credit cards.
Starting in April 2016, U.S. Costco Wholesale members who have previously had to rely on American Express plastic will be able to leave their homes with a Visa credit card instead.
The Issaquah-based retailer said it struck a deal with Visa to replace Amex as its credit-card network. It also made an agreement with banking behemoth Citigroup, which will be the exclusive issuer of its co-branded credit cards, which come with a rewards program.
Both deals, which apply to the U.S. and Puerto Rico, are subject to Citi buying the company’s co-branded credit-card portfolio, Costco said.
The agreements become effective April 1 of next year, the day after Amex’s 16-year-old relationship with Costco ends. The Costco card represented about 8 percent of Amex’s 2014 business.
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That partnership’s demise was announced last month after the companies were unable to agree on renewal terms; Amex shares tanked at the time.
A similar agreement Costco had with Amex in Canada expired last year; the company replaced Amex there with a co-branded Capital One MasterCard.
U.S. Costco members will be able to use their Amex cards through March 31, 2016. David Sherwood, Costco’s director of finance and investor relations, said in a phone interview it was yet to be determined if people will have to reapply for their Costco rewards cards.
The credit-card moves underscore how Costco is constantly on the lookout for deals, in this case lower processing fees from credit-card issuers. Costco’s huge scale — as the second-largest global retailer after Wal-Mart Stores, according to the National Retail Federation — means bargaining power.
In a conference call last month describing the impact of the breakup with Costco, Amex chief financial officer Jeffrey Campbell said that “revenue and profits on the spending inside Costco are much lower” for the credit-card company than at other merchants.
Visa shares jumped 2.0 percent to $276.76 in the wake of the announcement. Citigroup shares rose 1.6 percent to $53.25.
Costco said it would provide more information about the transition in coming months. Of Costco’s 671 warehouses, 474 are in the U.S. and Puerto Rico.