Costco Flips Card Portfolio To Visa, Citi

It didn’t take long for Costco to replace American Express and find new partners for its co-branded credit cards as the wholesaler retailer announced Monday (March 2) that it has chosen Citigroup and Visa as its new credit partners starting 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 said in a company news release.

AmEx announced Feb. 12 that its co-brand and merchant acceptance agreements with Costco will end March 31, 2016. Last fall, Costco said it would be cutting its ties with AmEx in Canada at the end of 2014. Costco was once in a retail class of its own that accepted American Express, but not Visa or MasterCard. That deal has now changed, at least for Visa. Costco said details about the new card’s benefits and terms will be made available to members soon.

When the news of Costco and AmEx severing their relationship broke, it came with bad news for the credit card company shareholders as AmEx’s stock dropped to a four-month low following the day’s announcement. Of course, in the case of Visa, its stock was up after the announcement. Visa shares rose 2 percent to a record high of $277 in early trading, and Citi shares rose 1.5 percent to $53.22.

“Costco is a solid co-brand partner given its affluent, captive member base and represents a solid win for Visa,” J.P. Morgan Securities analyst Tien-tsin Huang wrote in a note, according to Reuters. This sentiment was also shared by Stifel Nicolaus and Co. analyst John Davis, who called it an “impressive win” for Visa, citing the fact that a majority (90 percent) of Citi’s credit cards are MasterCard branded. Davis told Reuters that the deal is anticipated to increase Visa’s annual revenue by $120 million.