Costco card switches from American Express to Citi
Key dates in the switch of cards from the warehouse giant
By Tony Mecia | Updated: June 16, 2016
Dear Cashing In,
As a Costco executive member, I receive 2 percent back for Costco purchases when I use my American Express card, which I use a lot. No other cards currently save 2 percent for groceries at Costco. They're not accepted, even if they want to offer it. Is Costco going to provide a new card partnership that gives executive members the same rewards? – Matt
In March 2016, Costco announced exactly how it will handle the transition away from American Express. This change is going to open up a lot more possibilities of earning rewards while shopping at Costco, so if that is somewhere that you regularly shop, you’re going to want to pay attention to the changes.
You’ll recall that in February 2015, the warehouse chain had announced it was ending its relationship with American Express and was on the prowl for a new card partnership. It's unusual for a retailer to accept only one brand of card, but that's what Costco does. You either pay with an American Express credit card or by cash, check or debit card, though that is about to change.
It's important to note that the 2 percent back that you and other Costco members earn is not because of any card you hold. Rather, it's because you have paid extra to become an "executive member" of Costco. A regular membership is $55 a year, while an executive membership is $110. The 2 percent back comes in the form of a reward certificate mailed annually, and the rewards are capped at $750 a year (on $37,500 in annual purchases).
One related quick mathematical note: In order to make the additional $55 for an executive membership worthwhile, you must spend at least $2,750 at Costco every year, since 2 percent back on $2,750 in spending is $55.
However, there are important changes underway that you need to know about if you are a regular Costco shopper. In March 2016, Costco laid out details of how it would transition from American Express to Citi, which will start offering a Costco co-branded Visa card.
The big transfer date is June 20, 2016. On that date, Costco will stop accepting American Express cards and instead will take only Visa cards (plus the usual checks, cash and debit cards). And those Costco American Express cards will cease to work, in Costco and anywhere else. Also, any rewards accrued on the old American Express cards will switch to the new Citi cards.
Citi started sending out new co-branded Costco Visa cards to Costco American Express cardholders in May 2016. Existing cardholders do not have to apply, and there is no credit check for existing cardholders before the new cards are issued.
Details on the new Citi Costco card were announced in March:
- 4 percent cash back at gas stations, including Costco, capped at $7,000 per year.
- 3 percent back on restaurants and travel, no cap.
- 2 percent back on Costco purchases, no cap.
- 1 percent on everything else.
There will be no annual fee, except for the usual Costco membership. The full Costco Cash Reward program terms have been posted by Citi, which can be viewed here. And, according to Costco, its executive membership rewards program will not change. For more information, see "FAQ on new Costco Citi Visa card."
This deal offers a lot more possibilities to earn rewards than with the current American Express partnership, simply because there are so many more reward Visa cards than American Express cards. If you have a small business that buys in bulk at Costco, or if you tend to spend a lot of money there to feed your family, you should consider the new possibilities.
For instance, if it's cash back you're looking for, you might consider Capital One's Spark Cash Visa card ($59 annual fee, waived first year). It is a business card that offers an unlimited 2 percent back on all purchases. If you also have an executive membership to Costco, you will effectively receive 4 percent cash back on your purchases there – not too shabby!
If you're looking for a personal version of a card that offers a solid return at Costco, consider the Fidelity Rewards Visa (no annual fee), which gives 2 percent back. Another option would be Capital One's Quicksilver Visa card (no annual fee), with gives 1.5 percent back.
Of course, if you prefer other kinds of rewards, such as travel, many other possibilities now come into play with Visa, including airline and hotel cards and bank-operated travel reward cards.
However, if you aren’t keen on the Costco switch to Visa and want to add an American Express card in your wallet, you may have a comparable American Express card offer to consider. American Express’ co-brand partnership with Costco accounted for 17 percent of its U.S. cardholders in 2015, so to make up for the significant portfolio loss, Amex has been sending existing Costco cardholders offers for its Blue Cash Everyday card, according to Business Insider.
The American Express Blue Cash Everyday card boasts a 15-month, 0-percent interest APR and no annual fee in addition to a $250 statement credit welcome offer to cardholders who spend $1,000 in the first three months. Blue Cash Everyday cardholders can earn 3 percent cash back at U.S. supermarkets, 2 percent back at gas stations and select department stores, and 1 percent on other purchases.
In general, anytime you see changes like this with a merchant you frequent, you should spend a little time examining the new possibilities to see if they make sense for you.
|COSTCO CARD CHANGE AT A GLANCE|
|Costco has begun switching its cardholders from American Express cards to Citi cards. Here's what it means:|
Need more info? See "FAQ on new Costco Citi Visa card" for answers to popular cardholder questions.
|Updated: June 16, 2016|
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Options for business cash back cards – If you're signing up for a business cash back card, you have a lot of options. Be sure to calculate ahead of time which kind of cash-back deal can give you the most rewards ...
- Beware of checks sent with your card statement – If you receive convenient checks with your card statement, you might be tempted to use them, hoping to get rewards. Not only will you get no points for using these checks, but you could end up paying high fees ...
- Using rewards to fly first class – If you want to use your points to upgrade your seat category on a flight, it could still cost you money ...