- 1 Costco's New Credit Card: 5 Things to Know Before the End of May
- 2 when will costco issue new credit cards
- 2.0.1 What Will Happen To Existing Costco Amex Cardholders?
- 2.0.2 What Will the New Costco Credit Card Rewards Program Look Like?
- 2.0.3 What Happens to my Credit History and Credit Score – Will They Be Impacted?
- 2.0.4 Should I Look for Another American Express Card?
- 2.0.5 Should I Look for Another Credit Card?
- 3 Costco Replaces Amex with Visa
- 4 4 Reasons Why CapitalOne’s Costco Canada Partnership Might Fail
- 5 Citi Costco Credit Card (2017.3 Update: $55 Offer for Executive Members!)
Costco's New Credit Card: 5 Things to Know Before the End of May
Posted on Top Stories at 12:28 am on May 16, 2016 by admin
Image source: Wikimedia Commons.
The long relationship between Costco (NASDAQ: COST) and American Express (NYSE: AXP) is coming to an end next month with the introduction of a new co-branded Visa (NYSE: V) card that will take its place. How will the change impact members of the warehouse giant? Here are five things you need to know.
1. When will the change go into effect?
As a corollary, your American Express card should stop working after June 19. At that point, the card will no longer be valid.
2. What do you need to do?
One benefit to not reapplying for a new card is that your credit report won’t be pulled. This is good for consumers because credit pulls have a negative impact on your credit score, which in turn dictates whether or not you qualify for loans in the future as well as the interest rate you’ll have to pay.
The one thing you may need to do is transfer automatic payments that are tied to your American Express over to the new Visa. Along the same lines, if your American Express bill is paid automatically out of your bank account, you’ll need to set up autopay for your new card.
Image source: iStock/Thinkstock.
3. Will the new Costco rewards card be better?
Users of the American Express TrueEarnings card earn 3% cash back on purchases of gasoline, 2% cash back on travel and restaurant spending, and 1% cash back on everything else. The new Visa card raises all but the last tier of cash-back rewards.
According to Citigroup’s website, cardholders will earn:
- 4% cash back on eligible gas worldwide, including gas at Costco, for the first $7,000 per year and then 1% thereafter
- 3% cash back on restaurant and eligible travel purchases worldwide
- 2% cash back on all other purchases from Costco and Costco.com
- 1% cash back on all other purchases
4. Any additional benefits?
- Access to Citi Private Pass, which gives holders special access to purchase tickets to the concerts, sporting events, and more.
- Extended manufacturer’s warranties on purchases made with the Costco Anywhere Card.
- Damage and theft protection that covers the cost of repairs or a refund if purchases made with your new card are damaged or stolen within 120 days of purchase.
- Worldwide car rental insurance that protects you against theft or damage to a rental car when you pay for your rental with your Citi card and decline the rental company’s collision loss/damage insurance.
5. What will happen to your American Express account?
The good news is that any balance on your American Express co-branded card will transfer automatically to the new Visa card on June 20. The same is true of previously earned cashback rewards. Accrued rewards that were not previously distributed will be transferred automatically to the new card. As a result, when you receive your cashback rewards coupon in Feb. 2017, it will include cashback rewards earned on your Costco card from American Express during the first half of 2016.
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when will costco issue new credit cards
One recurring question that we have fielded from clients over the past several months has nothing to do with the stock market, Roth conversions, the upcoming election, or Social Security changes. Instead, it takes some variation of the following:
“Do you have advice on what credit card I should get to replace my Costco American Express card?”
Perhaps no credit card change in the history of credit cards has ever had such impact or been as newsworthy. American Express reports that its Costco branded card represents 10% of its outstanding credit cards and 20% of its loan portfolio. With a lucrative rewards program that has made it a favorite card of personal finance bloggers for years, the TrueEarnings American Express Costco Credit Card has made its way into the pockets of many consumers who now wonder, what next?
What Will Happen To Existing Costco Amex Cardholders?
In April, existing cardholders will receive correspondence from Citibank about the new cards. In late May or early June, cardholders will automatically receive new Costco Anywhere Visa Card by Citi. Existing credit lines and rewards points will automatically be transferred to the new Visa card. The only real inconvenience will be a new credit card number since Visa and American Express have different numbering conventions. Cardholders will then have to update any automatic recurring payments linked to their existing Costco card.
The change was supposed to take place on April 1 st but was delayed as American Express settled out final terms with Citi. Costco will stop accepting American Express and begin accepting only Visa credit cards on June 20 th . All Visa cards – not just the new Costco Anywhere Visa – will be accepted at Costco stores after June 20 th . After June 19 th , the existing Costco American Express card will no longer be accepted anywhere.
What Will the New Costco Credit Card Rewards Program Look Like?
Good news – according to the just-posted information from Citi, the new rewards program will be better than the old program. Cardholders will get 4% cash back on gas purchases (versus 3% on existing Amex card), 3% on travel and US restaurants (versus 2% on existing card), 2% on purchases from Costco (versus 1% on existing card) and 1% on all other purchases. This generous rewards program will continue with no annual fee.
What Happens to my Credit History and Credit Score – Will They Be Impacted?
The initial expectation was that the card transition would result in at least one credit inquiry and a hit to credit scores. However, the updated news is that the transaction will be seamless with no credit inquiries, no impact on credit scores, and a complete transfer of existing credit history from American Express to Citi. This is great news for card holders who have a long history of using the Costco American Express card.
Should I Look for Another American Express Card?
American Express will offer a new alternative card to the Costco card but with two drawbacks – the new card won’t be accepted at Costco (since only Visa cards will) and it appears American Express will require a hard credit inquiry to apply for the new card (which will result in a hit to your credit score).
Many benefits offered by the American Express card, such as car rental insurance coverage and roadside assistance dispatch, are expected to translate to the Citi Card. However, a few American Express benefits may not transfer – most notably, the extended warranty protection which provides up to one extra year of warranty on top of the manufacturer’s warranty. Alternatively, Citi provides some perks that American Express does not with the most notable being trip cancellation and interruption protection.
With all of this in mind, there really is not a compelling reason to apply for a new American Express card unless you simply believe that one of the cards in the Amex portfolio is the best card for you.
Should I Look for Another Credit Card?
There is not a “best” rewards card because each family has different spending categories and some families may value airline miles or hotel stays whereas other families want cash back rewards. The Costco credit card was a really good all-purpose rewards card and will become an even better all-purpose rewards card with no annual fee. For people seeking the convenience of one credit card that does not require a credit inquiry or require an annual fee, it is hard to beat the new Costco Anywhere Visa.
Families looking to extract the most value from an all-purpose credit card may find flat 2% cash back cards such as the Fidelity Rewards Visa Card and Citi Double Cash Card (both with no annual fee) provide higher annual rewards. Moreover, families who spend more than $2,000/month on credit cards will generally get the most value from an annual fee card that provides lucrative ongoing rewards with a large sign-up bonus. Some of the best current offers come from the Chase Sapphire Preferred card ($625 sign-up bonus towards hotels and airfare plus 2 miles for every dollar of spending) and the Barclaycard Arrival Plus World Elite MasterCard ($400 sign-up travel credit plus 2 miles for every dollar of spending). Reward-seeking consumers who want to optimize rewards should utilize www.creditcardtuneup.com – an excellent website to find the best rewards card(s) based on personal spending.
While there was plenty of uncertainty after Costco announced this credit card transition, the uncertainty has been cleared up and the result is an A+ solution for existing cardholders. Details of the planned transition are extremely customer-friendly and the net result is that Costco members who were not previously using the TrueEarnings American Express card will have even more incentive to use the new Costco Anywhere Visa Card by Citi.
Costco Replaces Amex with Visa
Tom Kerr, Updated on Apr 01, 2016
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Costco has chosen Visa to be its new credit card partner, ending a relationship with American Express that lasted more than 15 years. As you may know, if you’re a Costco shopper, the retail giant has a rather unique and limited policy regarding credit card acceptance.
Tremendous Savings but Limited Credit Card Options
While almost all retailers accept a variety of cards, Costco is a major exception. You can use most major credit cards at Costco, and the online Costco store accepts a few other types of credit cards. When shopping inside one of Costco’s brick and mortar stores, however, options are limited.
Costco sticks with one card exclusively, and will now exclusively accept Visa, but not MasterCard, making this a first for any retailer. After months of rather intense negotiations, American Express has said that it is no longer profitable enough for it to continue that partnership and Costco announced they will drop American Express.
A Powerful, Mutually Beneficial Partnership
The new partnership pairs two experienced and gigantic players. Citi, the bank that will issue the new Costco-branded Visa, is the largest issuer of consumer credit cards in the world. Meanwhile, Costco is one of the biggest retailers in the U.S., second behind Wal-Mart.
Starting in April of 2016, your Amex card will no longer work at Costco, but you will be able to use a Visa branded credit card. Costco will gain a significant market advantage through the partnership because it will now have direct marketing access to Visa’s customer base that totals more than 280 million people. American Express, by contrast, only has around 55 million cardholders.
Analysts believe Costco will reap huge financial rewards through this new partnership, since Visa normally charges merchants a much lower fee to process payments than Amex does. After the change was announced, the markets seemed to confirm that outlook because American Express stocks slumped, while shares of Costco and Visa rose.
Will Your Rewards Program Change?
Costco has not yet disclosed many details about the new card to be offered by Citi and Visa, although it did say it will be quite similar to the old TrueEarnings Card from Costco and American Express. The new card will also serve as a Costco membership card and will be accepted worldwide anywhere Visa is accepted.
The card is expected to offer an attractive rewards program especially for consumers who do a lot of shopping at Costco. Some of the perks of the old Costco Amex card being permanently phased out include: 3% cash back for gas purchases, 2% cash back for travel and restaurants, and 1% cash back on everything else. There card also came with no annual fee if the cardholder was a Costco member.
How this impacts you as a consumer really depends on how attached you are to using your Amex card. Those who already carry a Visa as one of their primary go-to credit cards probably won’t notice any difference at all – unless the new Costco Visa offers more generous rewards.
If you’re not a current Visa cardholder, but you are a loyal Costco customer, then you still have almost a year to compare different Visa products to see which one is the best for you. You might consider waiting until more information about the new Costco card is available because it may turn out to be the best all-around choice for convenience and rewards for future purchases.
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4 Reasons Why CapitalOne’s Costco Canada Partnership Might Fail
As we called it earlier in August, Costco Canada is ending its 15 year-old credit card partnership with American Express and beginning a new one with Capital One.
CapitalOne has already soft-launched its new product in select stores, and our understanding is the new co-branded MasterCard with Costco will fully launch by the end of September, 2014. American Express will no longer be accepted at Costco as of January 1st, 2015.
With over $17 billion in Costco Canada revenues at stake, this is a significant win for CapitalOne and MasterCard. However, we’re not so sure CapitalOne is going to come away from the deal profitably.
We believe CapitalOne will face 4 significant challenges to succeed with the Costco program:
1. Profitability: One has to imagine that CapitalOne offered more compensation to Costco than American Express was able or willing to match. But remember, the incumbent always has insider knowledge, meaning American Express knew more about how the Costco credit card portfolio behaved than CapitalOne did when Amex walked away from the table. In all likelihood, CapitalOne gave away most of the interchange revenue to Costco, thereby relying on Costco customers to spend out of store on their co-branded credit cards. We’re not convinced that’s going to happen nearly often enough.
There has always been a self-fulfilling prophecy when issuers fall into the trap of relying on cardholder out of store spend to drive profitability. It goes like this: the issuer gives away in-store interchange revenue to their partner and rely on out of store spend for interchange profits. However, because the issuer is relying on the out of store spend to fund their interchange revenues, they offer a weaker rewards rate to cardholders for out of store spend. As a result, the cardholder uses the co-branded card almost exclusively in the partner store, and then uses another card that offers them a better value proposition for their out of store spend. Then the issuer only gets the unprofitable in-store spend, and not much of the more profitable out of store spend. It’s a spiral of self-fulfilling declining margins.
More than a handful of issuers have found themselves in that predicament with retailers. The only winners are the retailers, in the short term, and the cardholders.
2. Size: Another challenge CapitalOne will face is competition from other Mastercard issuers for Costco customers’ share of wallet. As we know BMO, MBNA, National Bank, ATB, Sears, Hudson Bay, Shoppers, Target, Petro-Canada, WestJet & TD cash back are all MasterCard programs. In fact, Costco customers can earn more from BMO’s World Elite MasterCard in Costco (2%) or the MBNA Rewards World Elite MasterCard (2%), than they can with Capital One’s Costco card (less than 1%). When American Express had the Costco program, if a customer wanted to use a credit card within Costco, they had to get the Costco Amex card (very few people already had an alternate Amex card). Now, more Costco customers already have a MasterCard, than they did an Amex card. As a result, we actually believe there will be fewer CapitalOne Costco cardholders, than there were Amex Costco cardholders.
3. Interchange: The Minister of Finance has asked both MasterCard and Visa to lower interchange by 10-15% within the next few months. While MasterCard may exclude the “wholesale warehouse” merchant category from an interchange reduction, thereby protecting CapitalOne’s interchange within Costco’s stores, it can’t do anything about protecting CapitalOne’s interchange margin outside of Costco stores. This is when a CapitalOne Costco cardholder would use their card outside of Costco. This will put even further strain on CapitalOne’s out of store spend margins, which we surmise is the primary place CapitalOne is relying on making its money. As a result, it will either have to eat the margin reduction, reduce the cardholder value proposition or reduce Costco’s compensation.
3. Slow-Start: Capital One is not buying the American Express Costco credit card portfolio. That means Capital One is starting from scratch. In most cases, the new issuer buys the co-branded accounts from the incumbent issuer, so cardholders don’t have to re-apply. CapitalOne did this with HBC, RBC did it with Shoppers, TD did it with Aeroplan, CIBC did it with Petro-Canada. Growing organically will slow things down for CapitalOne.
In the meantime, American Express will do everything in its power to convert and retain former Amex Costco cardholders. They’ve already launched two new cash back credit cards (not charge cards), which somewhat mirror the Costco cash back card, but nonetheless both offer market leading earn rates.
- The no fee SimplyCash card offers 1.25% on all spend with no caps, and a bonus of 5% on gas, groceries and restaurants up to $250 cash back in the first 6 months. There is no annual fee
- The Preferred SimplyCash card offer 1.5% on all spend up to $100K then it goes to 1.25%, and a bonus of 5% on gas, groceries and restaurants up to $400 cash back in the first 6 months. It comes with a $79 annual fee.
All that said, we are excited to see what the new CapitalOne Costco cardholder value proposition will look like. Perhaps we’ll proven wrong. With an exclusive deal like this, both at the issuer and network level, perhaps MasterCard subsidized CapitalOne and contributed to the cardholder value proposition. We’re skeptical it will be enough.
Citi Costco Credit Card (2017.3 Update: $55 Offer for Executive Members!)
Costco Anywhere Visa Card by Citi Review
2017.3 Update : There’s a $55 offer for executive members now, ending on Apr 9. HT: reader Jeffrey.
2017.2 Update : There’s a historical high offer for this card:
(Don’t hit me, this chicken is worth as high as $4.99!)
2016.06.20 Update : Costco will only accept Visa credit cards starting from 2016.06.20. Those who get this card from AmEx Costco can register your account online now, and it is available to apply for. But don’t forget, the best card for Costco is the Chase Freedom this coming quarter!
- Earn 4% cash back at US gas stations (including Costco gas station); 3% cash back at US restaurants and eligible travel spending; 2% cash back at Costco and Costco.com; 1% cash back on other purchases.
- No annual fee if you are a Costco member.
- You must have an active Costco membership in your name. We may cancel your Card Account and participation in this program if you do not maintain your Costco membership. You must maintain your Costco membership to redeem Costco Cash Rewards earned with the Card.
- No significant sign-up bonus.
- Only first $7,000 purchases per Annual Reward Year (12 billing periods in a row beginning with the one that includes January 1st) at US gas stations can earn 4% cash back, after that you can only earn 1%.
- Foreign Transaction Fee.
- You will get your cash back as Costco annual coupon, although you can redeem them for cash at Costco, it is still a little painful.
This is a wonderful no annual fee cash back credit card! Among no annual fee credit cards, 4% cashback on gas (include Costco gas) is the highest cashback after Sallie Mae (SM) was discontinued; 3% cashback on restaurants is also as high as Chase AARP and is the best! The cashback on Costco itself is 2%, the only competitors are Chase Freedom Unlimited and Fidelity Visa Signature, however, Chase Freedom Unlimited is not available for many of us because of the 5/24 rule and Fidelity Visa Signature is useless considering the Citi Double Cash (DC) exists. In conclusion, all bonus categories are really good, for those who are not deeply interested in points and miles and favor cashback, this is a great card to keep! Nevertheless, there is no sign-up bonus on this card, so it’s better to convert/downgrade to get this card than directly apply for it.
Note that, in order to get this card, you need to be a Costco member first. The Costco membership annual fee is $55 (no additional cashback at Costco) or $110 (2% additional cashback at Costco). The question is, if you are not interested in Costco, should you apply for a Costco membership purely because of this credit card? In my opinion, it is not worthwhile, because the benefit is not so great for having a $55 annual fee. But it’s not a bad idea to try it out for a year and see, maybe you will become a Costco fan!