Costco’s switch from Amex to Visa a win for customers

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By Chris Isidore

NEW YORK (CNNMoney) — Costco is switching from American Express to Visa, and it looks like that’ll be a good deal for customers.

The store said a year ago it’s ending its agreement with American Express and switching to Visa on June 20. That means that Costco stores will only take Visa, and the Costco-branded credit card will be Visa instead of AmEx.

And it turns out that the new card will have an even better cash-back program.

The new Costco Visa, which can be used everywhere, will give shoppers 4% back on the first $7,000 of gas they buy, and 1% on purchases after that. The old Costco card only gave 3% back on the first $3,000 of gas purchases.

The new card will give 3% cash back on restaurant and eligible travel purchases, compared to 2% on their American Express.

Additionally, it will give 2% back on Costco purchases and 1% back on all other purchases. The Costco American Express paid 1% back on all other purchases, whether or not they were at Costco.

The old card was very popular with members. Back in February 2015, when the switch was announced, 88% of nearly 50,000 holders of the Costco American Express cards gave it either four or five or four stars in reviews on the American Express site.

But the new Visa card, which will be from Citi, is among the best cash-back offer of any card available on the market according to Virginia McGuire of NerdWallet.

“If you spend a lot on gas, restaurants and travel, this card has pretty great rewards,” she wrote in a recent review.

The new Visa card has no annual fee other than the $55 Costco membership, and Costco American Express cardholders will be automatically switched over to it.

Accumulated rewards will also transfer.

One hitch: The cash back that shoppers will get with the new card will be in a voucher that can only be redeemed at Costco, rather than at a bank. The card holder can get cash, or use the money for a Costco purchase, which is obviously what Costco is counting on.

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9 comments

  • Jo Aldridge

    The current AmEx cashback can also only be redeemed at a Costco and not at a bank. While it could be defined as a “hitch” as reported, it’s no different from the current card offered through Costco.

  • Anonymous Costco employee

    The current American Express reward is also a voucher, redeemable only at Costco for cash or merchandise. There is no change to the procedure.

  • Anonymous Costco employee's friend

    How many star rating exactly did the previous card get? Was it four, or five, or four, or was it five?

  • Damien

    LOL a win for customers, a lot of the shoppers of Costco sometimes don’t have good credit, it takes a lot to get a citibank credit card, so for those of us that didn’t jump on the band wagon when amex was partnered and offered the Costco amex, we will have to apply for another card with citibank that may or may not get approved because of citibank strict policies and procedures on extending credit. I myself just got my credit completely clean of negatives and was approved for the citibank Mastercard diamond preferred card back in February and has a Mastercard logo, when will Costco get its head out of its rear end and except all cards and be able to really open up its doors to making more money, I however will not be applying for the Costco citibank card, I already have 16 cards but all are paid off but my amex, citibank and discover card because they all had 0% APR and just transferred all debts to those cards. But I don’t need another one and I will just use my chase debit card to make my purchases or if I really need to I will buy the item from another vendor…

    • dstrausser83

      If Costco accepted other credit cards, like MasterCard, Discover, and Amex again then their account loses value. Right now because they only allow one merchant in, they hold the power and can negotiate bare minimum fees for transactions, keeping their prices low. If they accepted all the other cards, prices would increase and it would put them more on price levels of other retailers. It actually is a good thing to have only one credit card provider….

  • B. Manning

    Still prefer using my Delta Amex card rather than the Costco card – better rewards with Amex Delta card if you fly a bit. Will no longer be able to use this card at Costco. Very disappointed.

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  • Loraina

    The 4% back on gas seems limited. The fine print says: “Certain non-qualifying purchases. You will only receive 1% cash back, not 4%, at superstores, supermarkets, convenience stores, and warehouse clubs other than Costco…” Isn’t that just about everywhere besides Costco? So where exactly will I get 4% back besides Costco. It seems like everywhere that sells gas has some sort of convenience store attached to it.

  • dstrausser83

    This story is totally lopsided to discuss the benefits of the new Citi card and doesn’t mention what customers are losing. Yes, Citi is paying out higher rewards, but at what expense? The expense is the insurances and coverages you got automatically with American Express… just bought a new camera from Costco and your 3 year old dumped it in the toilet? If within 90 days, AMEX will refund the money up to $500. Bought airlines tickets and the company lost your luggage? Paid with your AMEX? No problem — AMEX covers you. Look at all the extra protections you are losing by going to Citi over American Express and you will see, that in most cases, for 1% reward more in some instances, you are losing out on a lot of other features.

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