Costco has discontinued its long-time partnership with American Express, and has teamed up with Citi and Visa. This change has many implications to the customers of the major wholesale warehouse club. Find out how you’re affected and what you can do when changes start to happen.

For 16 years, Costco only accepted American Express cards because of an exclusive partnership which meant the retailer didn’t accept any other credit cards (i.e., Discover, MasterCard and Visa cards). So, American Express card users — including those who owned the co-branded TrueEarnings card from Costco and Amex — were the only ones who could pay with credit at the checkout counter. (Cash, checks and debits cards were also accepted.)

How you are affected right now

The contract between Costco and American will end on March 31, 2016. In the meantime, Costco will continue to accept American Express credit cards as usual.

Costco and American Express are calling is quits after 16 long years.
Costco and American Express are calling is quits after 16 long years.

Anyone who is interested in applying for the TrueEarnings card from Costco and American Express can still do so. Costco did not specify when American Express will stop accepting TrueEarnings card applications — only that the application window will remain for open for the “short term.”

When it comes time to break up

Costco has been moving fast to make sure that it will have a credit card partner when the relationship with American Express eventually breaks off. The retailer announced that Citi and Visa will replace American Express starting April 1, 2016. If you’re a regular Costco customer, this is what the new deal means for you:

– Costco will start to accept all Visa credit cards starting June 20, 2016.

In the U.S., there are 304 million Visa credit cards compared to 45.6 million American Express credit cards. You’re more likely to have a Visa in your wallet than an American Express. Not only that, American Express credit cards have been known to be harder to get because the company tends to go for higher-quality borrowers.

amexvsvisa

Furthermore, many people hate the idea of carrying an American Express card because they are not accepted everywhere like Visa and MasterCard. Some businesses opt not to accept American Express cards because of their high credit card interchange fee (about 3% as opposed to the average of 2%).

The new partnership between Costco and Visa means that many more Costco customers can pay with a credit card.

– TrueEarnings cardholders will have a new home.

You can still apply for the Costco-branded credit card, for now...
You can still apply for the Costco-branded credit card, for now…

Under the new agreement with Citi, Costco expects Citi to purchase the TrueEarnings card accounts from American Express. If you have a TrueEarnings card, you should be on the lookout for notices about the transition.

According to an American Express customer representative, the TrueEarnings card cannot be converted to another American Express credit card.

I’m interested in whether or not the card’s cash back program would change. Costco and Citi didn’t share what the new credit card program will hold — we’ll probably get more information on that in early 2016. Currently, the TrueEarnings card has no annual fee and offers 3% cash back at gas stations and gas at Costco, 2% cash back at restaurants and certain travel purchases, and 1% cash back on everything else.

Why the fallout?

If you didn’t know already, every time you swipe your credit card at a store, the store has to pay a small fee — usually 1 to 3 percent of the purchases — to your credit card company. Through the exclusive partnership with American Express, Costco accepts only American Express cards in exchange for a lower percentage fee, which is undisclosed.

Visas and MasterCards may soon be accepted by Costco. Shutter tock
American Express charged a lower fee for Costco, so Costco only accepted Amex. Shutterstock

“Although we competed aggressively to renew the relationship, we were unable in the end to reach terms that would have made economic sense for our company and our shareholders,” said Elizabeth Crosta, an American Express spokesperson, in a written statement.

It sounds like Costco and American Express couldn’t agree on this particular fee, also known as the credit card interchange fee.

Other top-recommended cards to do the job

With the possibility that the current TrueEarnings card could change its terms, I think it is a good idea to go looking for alternatives ahead of time.

Here’s an important note: Costco and Costco gas stations are categorized as warehouse clubs. Most credit cards that offer bonus rewards on certain categories won’t count these purchases correctly. For instance, a card that gives you 3% cash back on gas will not give you that amount of cash back at Costco gas stations because they’re not considered “gas stations.”

After looking at many credit cards on the market, I would recommend these alternatives to the TrueEarnings card when shopping at Costco:

citi double cash card post ingCiti® Double Cash Card: It has no annual fee and you earn 1% cash back on everything you buy. Additionally, you earn another 1% cash back on the amount you pay towards your card bill.

Essentially, you can earn 2% cash back on everything you buy. I think this is a great card for nearly anyone, so it would be great for Costco shoppers too. Citi® Double Cash Card can come as a Visa or MasterCard. Remember to request a Visa, since MasterCard isn’t accepted at Costco.

Capital One Venture RewardsCapital One Venture Rewards: It has a $59 annual fee but you earn 2 miles per dollar on all your purchases. The miles can be redeemed for statement credits (card balance reductions) on travel purchases. Capital One Venture Rewards is one of my most-recommended travel rewards credit cards.

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  • tekknowledgey

    Costco has never done anything right by its customers. Why should they now? Their refusal to maintain American Express is another example of their liberal, left-wing, socialist/communist view of marketing. They are truly anti-capitalists and I hope they do out of business.

    • tekknowledgey

      That should be “GO out of business”.

    • Steve Shade

      How do you figure Costco is communist just because they make a change of credit cards?

    • MJAKESTEVE

      RETARD

      • tekknowledgey

        You must be one of those “duped” Costco employees who doesn’t read about their management. Their entire structure is socialist/communist oriented. Read the information about the philosophy of their management. Read the information about the organizations that they support. All of them are liberal, left-wing, socialist/communist and even Muslim-jihadist front groups. They gave a huge amount to an imman in the Cleveland area who ran an organization supposedly to help feed and clothe Israeli and Palestinian children. Then the feds found out that he was really sending money to Ben Laden and alQuaeda, they shut the operation down and deported he and his family. Costco was one of their biggest supporters in the Cleveland area.

    • jazzzyjezzy

      Silly boy. Costco is changing to visa/citi because it will help thier stock price & return more for their share holders. This is a business decision, a capitalist, republican, right-wing, make money kind of a deal. Now do you like it?

      • tekknowledgey

        You must be one of those “duped” Costco employees who doesn’t read about their management. Their entire structure is socialist/communist oriented. Read the information about the philosophy of their management. Read the information about the organizations that they support. All of them are liberal, left-wing, socialist/communist and even Muslim-jihadist front groups. They gave a huge amount to an imman in the Cleveland area who ran an organization supposedly to help feed and clothe Israeli and Palestinian children. Then the feds found out that he was really sending money to Ben Laden and alQuaeda, they shut the operation down and deported he and his family. Costco was one of their biggest supporters in the Cleveland area. Too bad their employees didn’t get some of those millions. I feel sorry for their employees. They could have used the cash.

        • jazzzyjezzy

          Oh my god tekknowledgey. You are a complete idiot, & you live in a fucked up fantasy world. Keep your month shut & get back in your mothers basement.

  • Capt. Crash

    Unfortunately (for you tekknowledgey, not for us Costco customers), Costco not only do not go out of business, but grow and grow and grow, with #1 on American Customer Satisfaction Index. They must be doing something right, and there must be something wrong in your ideology. Get over it.

    • tekknowledgey

      You must be one of those “duped” Costco employees who doesn’t read about their management. Their entire structure is socialist/communist oriented. Read the information about the philosophy of their management. Read the information about the organizations that they support. All of them are liberal, left-wing, socialist/communist and even Muslim-jihadist front groups. They gave a huge amount to an imman in the Cleveland area who ran an organization supposedly to help feed and clothe Israeli and Palestinian children. Then the feds found out that he was really sending money to Ben Laden and alQuaeda, they shut the operation down and deported he and his family. Costco was one of their biggest supporters in the Cleveland area. Too bad their employees didn’t get some of those millions.

  • FraserSt

    So until 4/1/2016 probably the best card to use at Costco is the Fidelity AmEx for 2%. (I never understood why people were so hot on their TrueEarnings Card from Costco and American Express which only earned 1% at Costco.)

    Starting April 1st of 2016, some of the best Visa cards to use at Costco will be:

    1. BankAmericard Travel Rewards Visa which can earn 2.625% toward travel if you qualify for Bank of America’s Preferred Rewards Platinum Honors status. (Or 2.25% with Platinum status or 1.875% with Gold status or 1.5% with no Preferred Rewards status.)

    2. Capital One Venture Visa which earns 2% toward travel.

    3. U.S. Bank FlexPerks Travel Rewards Visa Signature card which earns about 1.66% toward travel on spending at Costco and about 3.32% on cell phone as well as either gas, grocery stores, or airfare, whichever you spend the most on each month.

    4. Capital One Quicksilver Visa which earns 1.5% cash back on all spending including Costco.

    You might also want to try the reward calculator at CreditCardTuneUp. com to see which Visa cards will earn you good rewards for your Costco spending and other expenses. The calculator factors in bonuses and annual fees as well.

  • annoyed!

    Great, only just got my true earnings card in February, nice little earner for me as I pay the total amount off each month, now its going to be ditched! Thanks a lot Costco! In the UK, Costco are not very big and the prices for a lot of the products are more expensive than going to normal stores even the likes of normal supermarkets like tesco and asda, it was good however to find things you can’t pick up anywhere else, Especially for business. Id just started using Costco more since getting my card, now it looks like come next year I will be cancelling my membership!

    • Aren’t you going to at least wait to see what happens to the card program before you decide to leave? Citi could keep it the same, or make it better.

  • Billy Budd

    American Express has been beyond good with service, lost cards, questions etc. One is tempted to stick with them. They have a “Blue Cash Everyday Card” offer which I assume came because of the Costco change. It includes 3% back at supermarkets up to $6,000 per year, 2% gas, 2% at “select” department stores and 1% on everything else. There is no annual fee . . tough to see what is wrong with that.

    • The Blue Cash Everyday Card is definitely a great card for grocery shoppers — I have it myself. The more expensive version of the card, Blue Cash Preferred, has a $75 annual fee but you get 6% cash back at supermarkets.

      However, I doubt the card is in response to the breakup with Costco because the card was introduced a few years ago. Furthermore, the cards don’t actually offer much value for Costco purchases because Costco is considered a “warehouse store” so the card will just earn a boring 1% cash back on those purchases.

  • John

    So, will the True Earnings Card automatically be transferred over to Citibank?

    • John, that is correct. However, the switch won’t take place until early 2016 — so look for it when that time comes. I’m sure American Express will send notices to you ahead of that time.

  • John Munroe Madison

    So– I went to Costco yesterday May 10th 2016 and asked if I could use a VISA card instead of the AMEX and was told ‘” Not until June 20th” so the article above denoting the date for using VISA is incorrect . They have changed their agreement since this article was published .

    • John, thanks for pointing that out. The article has been updated with the correct date.

  • John Munroe Madison

    And just to add a quick note– If you happen to be planning a large purchase within the next 3 months-check out the Chase Sapphire Preferred VISA . It comes with a $500.00 bonus if you charge $4000.00 in the first three months of opening and an added $50.00 if you add someone to your card and they make any purchase at all of any amount to their card within 3 months. The first year is FEE-FREE but there is a charge after the first year . But if you cancel your card after the first 9 ,10, or 11th month you have earned some money . We pay our card debt monthly so if you are in a position to do that then this would be good for you . I DO NOT advise this for someone who carries credit card debt . No- No- No . Also added to your benefits– I just received an offer that if I refer someone and they get a card and use it in the first 3 months for any charge amount then they will add a bonus of $100.00 to my account points . So if you happen to take advantage of this offer I would appreciate you mentioning my e-mail as Johnnyiou @live.com or even mention it if you call them on 1-800-955-8060- I would also benefit from your action . But that is not a necessity. But just in case you do please- remember ” Johnnyiou@live.com” and confirm code of 9073 . Thanking you in advance. And it doesn’t cost anything to check it out .

  • Iva Haddit

    So what are the APRs??? The % of most cards is so high it would have been criminal back in the day of usury laws. Now the bandits have a free hand to rob you.
    With Amex we pay the balance every month. We will now do that with Visa. So visa won’t gain any interest from us. You should do the same. Visa is betting we won’t.