Costco Strikes Credit-Card Deal With Citi, Visa

Costco says it struck a deal for Citi to be the exclusive issuer of its co-branded credit cards, with Visa replacing American Express as the card network.

The deal is subject to Citi buying the company’s co-branded credit-card portfolio, Costco said.

Costco and American Express ended their partnership after failing to reach an agreement on renewal terms. American Express said earlier this month that the relationship, which goes back 16 years, is set to expire March 31, 2016. Costco says the deal with Visa and Citigroup Inc. would take effect the next day.

The deal means that Visa will be the only credit cards accepted at Costco stores. Currently, Costco accepts only American Express credit cards, though it takes debit cards from other companies including Visa and Mastercard.

The company said it would provide its customers with information about the transition in coming months. David Sherwood, Costco’s director of finance and investor relations, said in a phone interview it was yet to be determined if people will have to reapply for their Costco rewards cards.

Costco uses the exclusive deal to lower the credit-card processing fees it pays. Processors typically charge retailers more for credit transactions than for those on debit cards.

Costco Wholesale Corp., based in Issaquah, Washington, has 474 locations in the United States and 88 in Canada. It is the world’s second-largest retailer by revenue, according to the National Retail Federation.

On Monday, shares of Visa Inc. rose $6.98, or 2.6 percent, to $278.29. Costco shares rose 98 cents, or 0.7 percent, to $147.94.

This article appeared in print in the March 3rd, 2015 edition of Hamodia.