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As we’ve known since early last year, Costco is replacing American Express with Citi for their exclusive credit card agreement. With Citi taking over the contract, all Visa cards will eventually be accepted at Costco stores.
Citi was supposed to be taking over the Costco contract from American Express on April 1, though in early February we learned that would be delayed, and that American Express cards would continue to be accepted at Costco stores until at least June.
About a week ago we found out the reason for this — American Express is selling their portfolio of Costco cardmembers to Costco in a billion dollar deal, meaning those with the Costco Amex will have their card converted into a Costco Visa at some point over the coming months. This will make the transition easier for cardmembers, since those who want to continue to have a Costco credit card won’t have to apply for a new one.
In the Ask Lucky forum, reader Fredd noted he received a letter from American Express about replacing his Costco Amex card:
We expect that you will no longer be able to use your current American Express® Card for any purchases beginning in mid-2016 because it will be discontinued. You can keep using your Card and earning rewards as you do today until the end of the Card program. Please visit americanexpress.com/programupdate to learn about what may happen to your card account at the end of the partnership. If you would like to still have an American Express Card when the program ends, take advantage of this special offer to apply for the Blue Cash Everyday® Card.
American Express Bank, FSB invites you to apply for the no annual fee Blue Cash Everyday® Card, issued by our affiliate American Express Centurion Bank. You can get cash back on your everyday purchases, including 3% Cash Back at US Supermarkets on up to $6,000 per year in purchases. Terms and limitations apply.
Get more on everyday spending:
- 3% Cash Back at U.S. supermarkets on up to $6,000 per year in purchases
- 2% Cash Back at U.S. gas stations
- 2% Cash Back at select U.S. department stores
- 1% Cash Back on other purchases
Plus, experience all the benefits of Card Membership with no annual fee.
Fredd asks if this is the best card to move to post-Costco, or if there’s another card he should be considering. This is a situation many people are in, so I figured I’d address it in this post.
What’s interesting about Amex’s Costco approach
What’s interesting here is that American Express is simply inviting you to apply for another Amex card. The Amex Costco cards should convert into Citi Visa Costco cards at some point in a few months (you shouldn’t have to apply again), so I don’t think Amex can convert these Costco cards into other Amex products.
What Amex is doing here is inviting people to apply for a new card. American Express’ suggestion of applying for the Blue Cash Everyday® Card, is just that — a suggestion. However, in connection with the Costco situation, there’s no benefit to applying for it over any other credit card.
The reason they’re recommending it is probably because the rewards structure most closely matches that of the Costco American Express. The Costco American Express offers:
- 3% cash back at U.S. stand-alone gas stations and on gasoline at Costco (up to $4,000 per year), then 1%
- 2% cash back at U.S. restaurants and on eligible travel purchases, including at Costco
- 1% cash back on other purchases, including at Costco
Meanwhile the Blue Cash Everyday® Card offers the following:
- 3% at U.S. supermarkets on up to $6,000 per year in purchases
- 2% at U.S. gas stations & select U.S. dept stores
- 1% cash back on other purchases
The rewards structure doesn’t exactly match, but I think the point is that they’re both no annual fee cash back cards, which is why they’re assuming this will be a popular card for people to switch to.
With that in mind, I figured I’d share my thoughts on six general types of credit cards to consider if you’re looking for a replacement to your Costco American Express. The great news is that there are plenty of great credit cards out there, which should meet just about any consumer profile:
If you want cashback without an annual fee…
If you just want a simple cashback card with no annual fee, the Citi® Double Cash Card offers 1% cashback when you make your purchase, and another 1% cashback when you pay for your purchase. That’s the equivalent of 2% cashback. Getting 2% cashback with no annual fee and no strings attached is pretty tough to beat.
If you want a higher return Amex cashback card…
American Express is suggesting you switch to the Blue Cash Everyday® Card. But if you’re someone who spends a lot at supermarkets and on gas, you might want to consider the premium version of this card, the Blue Cash Preferred® Card from American Express. It has a $95 annual fee ($75 if your application is received by 8/3/16), and offers the following return on spend:
- 6% at U.S. supermarkets on up to $6,000 per year in purchases
- 3% at U.S. gas stations & select U.S. dept stores
- 1% cash back on other purchases
If you spend $6,000 per year at supermarkets, that means you’d earn $360 cashback at supermarkets alone, which more than justifies the annual fee.
If you want an Amex which earns points…
While a lot of people like the simplicity of cashback (for good reason), there’s also a lot of value to be had with points-based cards. One of the most compelling no annual fee Amex cards is the Amex EveryDay® Credit Card, This card offers:
- 2x points at U.S. stand-alone supermarkets (up to $6,000 per year), then 1x points
- 1x point on other purchases
- A 20% points bonus when you use your card at least 20 times in a billing period
In other words, you’re earning 2.4x points at supermarkets and 1.2x points on other purchases, assuming you have 20 transactions per month. That’s pretty awesome for a no annual fee card.
These are points you can transfer to airline partners, including Singapore Airlines. Just to given an example, you can redeem as few as 57,375 Membership Rewards points for a ticket in Singapore Airlines Suites Class from New York to Frankfurt. Not a bad reward for your everyday spend!
If you want an Amex which earns more points…
If you like the concept of earning points rather than cashback, consider the premium version of the Amex EveryDay® Credit Card — the Amex EveryDay® Preferred Credit Card. This card will really super charge your points earnings. On this card you earn:
- 3x points at U.S. stand-alone supermarkets (up to $6,000 per year), then 1x points
- 2x points at U.S. stand-alone gas stations
- 1x point on other purchases
- A 50% points bonus when you use your card at least 20 times in a billing period
That means you’ll be earning up to 4.5x points at supermarkets, up to 3x points at gas stations, and up to 1.5x points on everyday spend. That’s a huge return.
If you want a huge bonus for applying for a card
The Costco American Express didn’t offer a sign-up bonus when it was being issued, though all of the above cards do offer some sort of bonuses. If you want a big bonus, consider applying for the Starwood Preferred Guest® Credit Card from American Express or Starwood Preferred Guest® Business Credit Card from American Express.
I value the Starpoints earned on the card at ~2.2 cents each, so to me that’s a bonus of ~$600 just for getting the card and completing the minimum spend, which is huge. You’l have to spend a lot of time spending on other cards to earn that much value.
Other points earning cards to consider
If the reason you had an American Express card was because of their relationship with Costco, you’re no longer limited to their cards. Consider another card which offers big sign-up bonuses and great returns on everyday spend for the categories in which you spend the most. For example:
- The Citi ThankYou® Premier Card offers 3x points on travel and gas, 2x points on dining and entertainment, and 1x points on other purchases
- The Chase Sapphire Preferred® Card offers 2x points on dining and travel, and 1x points on other purchases
- The Premier Rewards Gold Card from American Express offers 3x points on airfare, 2x points at US gas stations, US restaurants, and US supermarkets, and 1x points on other purchases
Earn 3x points on gas purchases with the Citi ThankYou Premier Card!
The card which is best for you really depends on how much you spend, which categories you spend most in, and what kind of rewards you’re after. The Costco switchover from American Express to Citi is leaving a lot of people confused, so hopefully the above gives a good outline of all the possible directions you could go with your credit card spend, from a simple 2% cashback card like the Citi® Double Cash Card, to a card which offers huge bonus points in many categories, like the Citi ThankYou® Premier Card.
So if you’re still shopping at Costco you can keep using your American Express cards for a few months, at which point they’ll be converted into Citi Visa cards. Hopefully the switchover will leave some people inspired to get new and more rewarding credit cards.
Non-Affiliate Product Disclaimer: The information for the AmEx Everyday Preferred has been collected independently by One Mile At A Time. The card details on this page have not been reviewed or provided by the card issuer.