Amex Sells Costco Portfolio To Citi In Billion Dollar Deal

As we’ve known since early last year, Costco is replacing American Express with Citi for their exclusive credit card agreement. This is a huge loss for American Express, given that Costco represented roughly 10% of their US credit card business. With Citi taking over the contract, all Visa cards will eventually be accepted at Costco stores (however, there’s already a trick for using Visa cards at Costco stores).

Citi was supposed to be taking over the Costco contract from American Express on April 1, though a few weeks ago we learned that would be delayed, and that American Express cards would continue to be accepted at Costco stores until at least June. As I speculated at the time:

We don’t have the details of exactly what’s going on, though it seems that this is something between American Express and Citi, rather than something between Costco and one of the issuers. That leads me to believe that they may be trying to work out a deal to convert those with the Costco American Express to the equivalent Citi product.

Previously the assumption was that cardmembers would have their cards converted to another American Express product, though perhaps there’s a way they can make this mutually beneficial for both issuers (I assume it won’t be cheap for Citi, though).

It appears that’s exactly what was going on, as American Express and Citi were trying to come to an agreement over what to do with cardmembers. The default assumption was that those with Costco American Express cards could have their cards converted into other American Express cards, and then people would have to apply for a Citi Costco Visa, if they wanted that product.

But they came up with a better solution.

Through the deal, from which American Express is expecting to book a gain of about a billion dollars, those with the Costco American Express will have their cards converted into the Costco Citi Visa. While an exact date still hasn’t been set, the deal is expected to close in June.

To me this seems quite smart, from the perspective of American Express and Citi. If they could find a mutually beneficial way to do so, it was better for Citi to already take over the captive Costco customers, rather than paying to acquire them again. If American Express kept those customers, chances are many would have canceled their credit cards, and certainly wouldn’t have been as engaged as they were with their Costco cards.

Bottom line

If you have a Costco American Express, expect it to be converted into a Visa come June 2016. This also means you might not be eligible for the sign-up bonus again once the card converts, so if that’s a consideration, you might want to consider canceling it before the card converts to Citi in a few months.

What do you make of the Costco credit card automatically being converted from American Express to Citi?

Comments

  1. When will Citi start to offer their existing cards with a Visa brand? I wanted my Citi Premier and Prestige with Visa brands but was told by the Citi agent that 95% of the Citi cards are Mastercard. If that is the case I prefer to use my Chase Sapphire Visa to shop at Costco.

  2. Will the “converted” card count as a new card on a credit report. I don’t want to keep the card if it counts as a new account. Not worth it unless maybe the account length is the original date of the card. I have been a member of Costco for over 10 years, so if it will keep account length then maybe okay. Otherwise I think I’ll cancel. Anyone know what typically happens in these conversions?

  3. @anon: Costco shows as “Category: Merchandise & Supplies – Wholesale Stores” on my Amex. However, when I use my Amex on Costco gas stations it shows as Category: Transportation – Fuel. That is where having a Citi Prestige with a Visa brand would be great so you can get 3x points when used at Costco gas stations. The terms of Citi Premier card says the following:”starting 4/19/2015 you will earn additional ThankYou Points on gas purchases made at warehouse clubs and convenience stores.”

  4. I cannot wait until the day that the Costco Amex to transferred to Citi. I’ve kept this card only because how long I have had it. I never touch the card. Over the years Amex has gone out of their way to make me angry at every possible point – I am hopeful that they won’t be around in 20 years.

  5. I’d personally cancel the Amex card and wait to see what incentive Citi rolls-out with the new card. In the process, if Amex waives the fee for the first year on another card (which I already have received a lifetime welcome bonus such as SPG) then I’d take that especially considering Chase will most likely take over SPG credit card business when Starwood + Marriott merge and then rinse and repeat 😉

  6. I still contend there is downside in this for Delta, as many people carried AMEX cards because of the three-way Costco->AMEX<-Delta Menage a' Trois…

    With the switch of all those Costco cards to a Visa it's one less reason to carry an AMEX

  7. So will the Costco CashBack earned between February payout and April cutover transfer to the new Visa card?

  8. Once my Costco Amex card is converted to the Citi Visa Card, will my Costco Amex be completely closed out? I’m wondering if the conversion will free up one of my 4 Amex card slots, so I can apply for a new Amex card in the future.

  9. “…This also means you might not be eligible for the sign-up bonus again once the card converts..”

    What sign up bonus? Didn’t know one was ever offered.

  10. Just think of the hassle of closing the card if you still plan to shop at Costco. That was your membership card too. What happens to your accumulated costco cash back that you haven’t received yet. Lose it all? You will now proceed to wait in the membership line where they will have to issue you a new generic membership ID. Please wait for your picture to be taken, etc. There are going to be some people who cancel their Amex before the conversion, as is intimated here, then go to Costco to shop and realize they have a problem. Yes, you can use any Amex there, but no other Amex doubles as your membership card. Just plan for the hassle of getting a new membership card.

  11. Do we know yet if the non Costco Citi cards (specifically the prestige) will get you into Costco and let you pay?

    Thanks!

  12. I’ll be cancelling my Costco Amex. The lack of information from both Costco and Amex (or Citi) has led me to be disinterested in staying a member at all. This is a huge marketing opportunity for all three parties and is being squandered.

  13. I closed my Costco Amex a month ago. I have received the new Costco Visa(citi) and I can’t use it because I closed the prior card.
    NOBODY in store could solve the problem. I have been a member since 2002 and if I want to keep the membership, what could I do?
    I tried to apply for the citi visa costco, but they don’t recognize my name, JUST BECAUSE I HAVE CANCELLED BEFORE I RECEIVED THE NEW ONE, that is not recognized
    unbelievable…
    HOW TO PROCEED NOW? I used Costco for gas as well for food.

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