Leaked Details of the New Citibank-issued Costco Card

It was earth-shattering in the payments world when Costco ditched American Express as their co-brand card issuer and signed on with Citibank. Citi offered them an amazing deal that gives Costco nearly free credit card acceptance.

I’ve suggested that as costly as it was for American Express to lose Costco, it would have been more costly to retain Costco. As big a win as Costco is for Citibank and Visa, it’s a deal afflicted by the winner’s curse because Citi/Visa had to overpay to secure it.

Nonetheless, losing Costco was a huge deal for American Express since ~10% of American Express cards were co-brand Costco products. That’s nearly as many co-brand cards as American Express has with Delta, Starwood, Hilton, and everyone else combined.

Current Costco American Express cardmembers will automatically receive Citibank-issued Costco cards (Citi picked up American Express’ “back book”).

It turns out that we know more than this, even though Citi won’t start issuing the card until April 2016. That’s because as Doctor of Credit points out in “Leaked Details on Costco-Citi Credit Card Rewards”, the Citibank Costco credit card deal was filed with the SEC and is publicly available online.

Features of the new Costco cards are laid out in the document.

  • They’re the same as the current Costco card from American Express
  • Which is disappointing
  • Because as huge a portfolio as this was for American Express, it wasn’t a very good consumer card.

It’s a no annual fee 1% card that bonuses travel and US restaurants (2%) and gas (3% on the first $4000 spend each year). The small business version of the card is the same but 3% gas is capped at $7000 in annual spend. Both cards require Costco membership to be eligible.

As a general cash back card, Citi Double Cash is much better. That’s a Mastercard though, and Costco will be accepting Visas (like Chase Sapphire Preferred and indeed nearly the entire Chase portfolio other than the IHG Rewards Club card).

The Citi Costco card won’t even be the best cash back Visa — the Capital One small business Spark Card offers 2% on all spend.

Nonetheless, the co-brand agreement makes interesting reading for those who want to learn what happens when a co-brand partner gets acquired, or acquires another business with a co-brand agreement for instance.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. @John As Gary said, “Costco will be accepting Visas (like Chase Sapphire Preferred and indeed nearly the entire Chase portfolio other than the IHG Rewards Club card).” so any Visa will work there–just not American Express or Mastercard (not even a Citibank Mastercard AFAICT).

  2. @gary – seems to me that citi did over pay, giving away transaction costs and will lose the loan book, a slow and painful death – as there are plenty of people whom already have Visa’s. the selling point for Costco/Amex Card was that most didnt already have Amex and would use that not only exclusively but outside of Costco. Why would Costco/Visa users (and the loan book) continue to use Visa if you prefer the CSP (or whatever it may be) as your main horse and has first use status?

  3. But still no bonus for COSTCO spend?? So strange. Why would I get a co-branded card that doesn’t provide any kind of special perk for the co-brand partner?

  4. Everyone already has a visa (or more) – why would anyone bother with the Costco branded one? The reason people had a Costco Amex was to enable shopping at Costco, not because it was some great card. I already had an Amex, so why bother? But I am sure not signing up for another mediocre Visa just because it says Costco on it – I am guessing most of the Costco population is the same.

  5. I don’t have a Visa card currently and am AA ExPlat, with a Citibank AA MCard that I need to get a certain amount of spend on in order to get the 10,000 miles moved from RDMs to EQMs. I go to CostCo a lot and would like to be able to use it there, but that’s apparently not going to happen.

    I also fly Turkish Airlines from time to time and would like to get a card that could help me get *Alliance miles that I could use on Turkish. I recently discontinued my Chase Sapphire and suppose I could re-apply for it, but are there other Visa cards that could get me United or other *A miles that I could use on Turkish?

  6. source for the mention that Costco will be accepting Visas as well as MC when they change? I haven’t seen that and that is even more of a game changer as the above comments allude to.

  7. I think the Business Costco Amex gives 4% cash back for gas, not 3%.

    But as long as Officemax has 5x UR on $500 Visa and MC debit GCs, why would anyone screw with anything else for non-Amex spend? Back up the truck.

  8. @Sharon My thoughts as well. I assume it would be too expensive to offer 2% back. Perhaps someone else can weigh in.

  9. @Louis – your best bet would be the United Mileage Explorer or Club cards. The Mileage Explorer gives 1 mile/$ plus 10k bounus miles on $25k spend, so if you can spend that much, you get 35k miles for $25k spend, so 1.4 miles/$. The United Club card earns a straight 1.5 miles/$ on all spend, no matter how much, but it comes with a $500 annual fee (although it has other perks like Priority Access, 2x checked bags, and club membership). I believe both will also help waive United’s spending requirements to earn elite status if you’r going for that sort of thing if you spend enough on the card.

    On the one hand, it is disappointing that the card doesn’t offer better perks. 2% cash back at Costco would’ve been nice, but if you have a Sapphire, it’s entirely possible to get the same value out of 1 UR point. Also keep in mind executive members can get 2% cash back on your Costco spending if you spend enough.The only potentially worthwhile bonus is the 3% cash back on gas if you buy your gas at Costco, since you’ll have to use a Visa to buy it and that’s the only one I know with any sort of decent bonus on gas spending. On the other hand, I’d rather be earning Chase UR points than Amex MR, and with the amount of spending I do at Costco, it’ll be a nice bump in my UR balance at the end of the year (should end up with around 6k extra points probably). Won’t help Citi one bit though. I do find it weird that they went with Citi as the bank and Visa as the processor. A part of me wishes it had been Mastercard, as then you could’ve used the Barclay’s card or the Citi double cash. Is the Capitol One Venture a Visa? that might be a worthwhile one to get for cash back since its 2x points (2% cash back) on everything. Being an executive member plus the Capitol 1 One would total 4% per year return.

  10. The Capital One Business Spark card may not be the best card for most people since they will never realize a net return of 2% after a $59 yearly fee and one has to have a business to use the card. One would have to exceed $11,800 annual spend to exceed the Capital One Quicksilver 1.5% return with no annual fee using the Spark card after accounting for the %59 yearly fee. The Capital One Quicksilver may well be the new best Costco Visa Signature card returning 1.5% on all spend including Costco gas and warehouse purchases with no annual fee. If you buy enough gas, the Costco Citibank Visa may be worth it, but a far better option is having the AMEX Blue Cash 5% card or the AMEX Blue Cash Preferred in combination with Citibank Double Cash and the Capital One Quicksilver card – all of which have no annual fee.

  11. If you had an AmEx Costco cobrand card, Amex is issuing the Blue Cash preferred for no annual fee. I know because I called Amex today.

    Costco doesn’t get to tell me which cards to use. If they no longer take the card I want to use, I’ll just go to Sam’s where they are now taking Amex.

    Good luck to Costco loosing all Amex corporate clients. I bet they spent a fortune, and unlike individuals, they can’t just apply for new Visa Corporate cards. They have contracts with Amex.

  12. @AP – How did you approach the issue with them? I have a Bluecash Everyday and Costco Amex, but would love to upgrade to a Bluecash Preferred or Everyday Preferred, especially with no annual fee.

  13. Just call Amex and tell them you wish to cancel your Costco cobrand because they will no longer take Amex starting March of next year. If the rep knows what they’re doing, they’ll offer you the Bluecash preferred at no annual fee.

  14. The Visa Credit Card from Costco would not make sense for many. The following 3 Cards together will be great:

    1. Citi Double Cash For Everyday Purchases- It will ultimatly yield 2% on everything. Being a MC it will not be accepted at Costco.
    2. Capital One Venture Card. Visa Card that gives 1.5% on all purchases including costco
    3. If you want Amex, the Amex Blue Cash is the way to go. It gives 3% on groceries and 2% on gas and Resturants.

    If I have all this, why get a Citibank Costco card. The only upside would be 3% on gas verses 2% but you will get 1.5% for costco purchases with the venture card. With this scheme Citibank Looses and both Capital One and Amex wins.

  15. Amex will not switch you to the Blue Cash Preferred. However, AMEX can convert the card to the Blue Cash Everyday Card. The Blue Cash Everyday has the same scheme of 3%-2%-1% just as the Costco AMEX and no annual fees. Just the 3% is for Supermarkets and not on gas. Gas however will be at 2%

    These are the best cards to have if your thinking about your Reward programs at Costco:

    1. Capital One Quick Silver is a Visa that will give you 1.5% on all purchases. Costco will accept it.
    2. Citi Double Cash- you will get 2% back on all purchases. It is a Master Card so you cannot use it at Costco.
    3. If you want an Amex, the go with the Blue Cash Everyday. It’s main benefit is it will give 3% of Groceries. Then 2% on Gas, Restaurants, Travel, and 1% on everything else.

    With these cards..you will get the most out of your cards

  16. My CapOne Quicksilver card is a MasterCard. When did they switch to Visa? I wonder if I could get mine reissued as a Visa?

  17. Half of what I spend at Costco is on gasoline. I don’t really use credit cards anywhere else and I don’t fly. I think I’ll just stay with the costco card.

  18. I read an investigation that if you want to switch you need to reapply for citu and it will be done after hard core credit review, and amex will not reissue new card without credit report review,w hich will hit your score

  19. Hi,

    I tried to get AmEx to bump me to the Blue Cash Preferred card, either dropping the $75 for the first year or at least upping the $150 after $1000 spend to the promoted $200 after $1000 that they’re offering for current Costco card holders who take the Blue Cash Everyday card. The person I spoke with couldn’t seem to understand what I was asking for, and said there was no way to make either of those things happen. Oh well, I guess all you can do is ask.

    Having said that, does anyone know their policy on accepting the Blue Cash offer with $200 back, getting that, then upgrading to the Preferred card in a few months? We spend enough at the grocery to more than justify the $75 annual fee ($6000*0.06=$360-$75=$285 > $6000*0.03=$180). Alternatively, any thoughts as to AmEx sweetening the offer as the drop-dead date approaches?

    Thanks for any insights!

  20. @Sharon – I understand why we’d all WANT a bonus for shopping at Costco but the point of not doing it is to keep interchange expense lower for Costco

  21. If Costco is honoring the use of any Visa card for payment at the checkout stand and gas stations, will their Citi-issued Costco Visa be used mainly for entry purposes???

  22. American Express (offer I got) blue cash is offering no annual fee, no interest for 15 months, balance transfer costs 3%, current rate after that is 12.99%. 3% $ groceries / 2% $ US gas stations/ 2% $ department stores/ 1% $ “other purchases up to $6k. $$ is in the form of statement credit to be redeemed (not used for payment. Also $200 back if you spend 1,000 first 3 months.

  23. I talked to CostCo membership (800 number) today and she said that they received a memo today saying that the AmEx transition is behind schedule and won’t happen until mid-year. She said expect it June or July, not April as originally planned.

  24. At least make it as good or better then the Sam’s Club MasterCard. Which boasts 5% on gas, 3% on travel (including restaurants), and 1% on everything else. Costco made a bad decision, I only kept the card because I wanted an Amex, I don’t need another Visa.

  25. Does anyone know if there is a card that sends a check to the cardholder at the end of the year like the Costco Amex?

  26. I agree with other posters… I already got a 2% cash back on anything Visa, and it takes the $$ off at the end of each cycle vs. the annual check crap that the Costco AMEX does. Why would I want another Visa card? If there’s an option to decline I will, or I’ll close the account.

    On that note, since AMEX is trying to retain me the current AMEX Costco card isn’t even the best AMEX anymore! I got a Simply Cash AMEX Business Card offer, 5% at office supply stores, 5% on cellular services, 5% with select Open partners, and 3% (5% for first year) on a category of choice, 1% on other (Costco would fall in to this), and it also pays rewards on each statement if you wish – so to me hands down this is a better card then Costco’s. As for the fuel reward I have a 5% cash back card from my credit union (Pentagon Federal) – it’s a Visa and it works at all gas stations no caps! I never used my Costco AMEX for gas, basically just used it for Costco purchases period.

  27. When will I receive my new Costco membership card and can I use the co-brand AmEx/Costco one that I already have until then?

  28. There is something Costco and Citi haven’t thought about by not issuing new cards until after the old ones expire. I have several monthly payments taken using the Costco AMEX. There is going to be a gap and I am going to have to do something ad hoc before I can transfer those payments to the new Costco card — or I am going to have to link those payments to another card.

  29. well for business customers that still want an AMEX, the Simply Cash PLUS card just became available today at no annual fee. 5% cash back on cell phone bills and office supplies, 3% back on a choice category, which now includes computer hardware and software, 1% everything else, and will let you spend above your credit limit as long as you agree to pay it off by the next month, much like there charge cards. and the caps on the plus doubled to 50k a year for the accelerated categories.

  30. So if we have to apply for a new AMEX card if we want to still have that card, what happens to the high limits many of us have on that card? By issuing a new card, are they going to knock the limits way down to a ridiculously low amount. I have spent years working with that card to get my limits higher, so I would have a better debt ratio.
    Pretty much the same question for the Citi Visa card. If they are only going to give us say $1000 or $2000 credit limit, the hard inquiry needed would not make it worth it. Especially as mentioned above if you opt for both cards the credit inquiries can really ding your credit score.
    Any thoughts or knowledge about these scenarios?? thanks so much!

  31. If your worried about a hard hit go for a pre approved offer, Amex has those available for most Costco members and it will remove the need for that, and because of the unique situation a lot of limits are staying intact.

  32. Thanks for the info Bill. What you are saying makes sense. I never occurred to me that a pre-approved card wouldn’t necessarily have a hard inquiry.
    I learned my lesson in 2007 when I was building a house. I had a general contractor, but every sub contractor, plus Home Depot, the glass shop, etc always wanted to pull my credit. I didn’t think much of it. Then I went to apply for a Barkley’s credit card and was denied. So I was wondering what was going on. Get this….I had 15 hard inquiries in a year and it dropped my credit score from 780 to about 580. I was just about speechless. It took me several years to get my score back up. So that’s my fear of multiple hard inquiries!

  33. No one is talking about the interest rates on these new cards to be issued by Costco. If you make a big purchase and don’t pay it off right away, what will the interest rate be ????

  34. I have 2 cash rewards cards (visa) with BofA and no annual fee
    3% cash back on groceries with 1500.00 quarterly spend on each an then a 75% match on rewards earned and deposited into my BofA account. This is going to work out great! Costco here I come!

  35. My understanding is, to get the best cash back is to use:

    1) Capital One Venture Card Visa – Rewards 1.5% on everything, including gas
    2) American Express Blue Cash Preferred – 6% cashback on groceries, 3% cashback on gas
    3) Citi Double Cash – 2% cashback on everything else
    4) If you have a business, replace #3 with a Capital One Spark – 2% cashback
    5) Discover It card – Use only when quarterly promotions are larger than other cards (5% cashback on select categories for 3-4months)

  36. Here’s is what I’m wondering, that nobody seems to know. What if I don’t want the Costco Citi card? I’m content staying with Amex and don’t really want another Visa. All the literature I’ve seen sent out reads like all Costco Amex customers will be receiving their new Costco Visa cards like it’s something out of my control.

  37. @Aaron well you could cancel before that happens, but the expectation is that Citi is buying Amex’s “back book” meaning existing cardholders get new Citi Visa cards. If you want an Amex, you need to apply for a new one. I haven’t kept up on whether Amex is letting current Costco cardmembers product-change to a different Amex credit card.

  38. Fidelity rewards AMEX card is becoming a Visa card in 2016 also. No fee, and pays 2% on all spend, when the funds go to a Fidelity account, taxable or IRA. With Sams and Costco now both taking Visa, I anticipate going from 3 cards in my wallet down to 1.

  39. I have a VISA with Sam’s Club with 1%, 3%, 5%, instead of the Costco 1%, 2%, 3% VISA. Can I use my Sam’s card at Costco?

  40. What is the best no-fee visa card for gas rewards? If Fidelity moves to Visa @ 2%, I will use that in Costco store but pick up a different card specializing in gas rewards for the station. Please advise.

  41. Solution:
    Re-brand the current Citi Double Cash MC to Visa, keep the current unlimited 2% cash back on every purchase, offer additional 5% on Costco gas and 3% on Costco office supplies…boom, Bob’s your uncle lol! I can continue to use my Citi DC for every purchases except for gas outside of Costco which I currently use the PenFed Platinum Cash Rewards for unlimited 5% cash back on gas.

  42. @DDS that would be the PenFed Platinum Cash Rewards. No annual fee if you open a Money market and put the minimum in…I think that’s $25

  43. I work for Costco and we will only be accepting Visa cards as credit. ONLY Visa. Canada accepts Mastercard right now but we will not here in the U.S. That includes gas station purchases (we will still be accepting other forms of payment such as debit cards, cash, and checks).

  44. Just got my Costco Citibank visa notice – the new card (automatically issued with your previously earned Amex rewards) will offer: 4% on all gas (up to $7k), 3% on restaurant &travel, 2% ON ALL COSTCO PURCHASES, and 1% on everything else.

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