After failing to secure a new co-branded credit card agreement with American Express, Costco has inked long-term deal with Citibank. The new Citi Visa cards will be effective next year.
The implementation of the deal is subject to the purchase of the existing co-brand credit card portfolio by Citi.
Under the terms of the agreements, Citi 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.
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.
Costco says it will provide its members with additional information in the coming months regarding the anticipated transition from its existing co-brand credit card program.
AmEx says it began discussions on a possible renewal with Costco well in advance of the contract expiration. However, AmEx was unable to reach terms that would have made economic sense and will focus on opportunities in other parts of its business where there is significant potential for growth and attractive returns over the moderate to long term.
The co-brand relationship and merchant acceptance agreement with Costco Wholesale Corp., the largest U.S. warehouse-club chain, is set to end in the U.S. on March 31, 2016. Presently, Costco Cards account for one out of every 10 American Express Cards in circulation.
More than 70% of the spending from the Costco Amex cards takes place outside of Costco, American Express reports. The company has stated that it will approach these customers with alternative Amex products.
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