By Robin Sidel And Angela Chen
Costco shoppers will have a lot more payment options at checkout
next year.
The warehouse club on Monday named Citigroup Inc. and Visa Inc.
as its new credit-card partners, replacing American Express Co. as
the exclusive credit-card brand at its stores beginning in April of
next year.
Costco Wholesale Club Corp's deal will expand greatly the type
of plastic that is accepted at the chain, which previously only
accepted AmEx credit cards and debit cards branded by Visa and
MasterCard. Now, shoppers will be able to use many other different
types of Visa credit cards that are issued by other financial
institutions, as well as a new credit card that is offered by Citi,
one of the nation's biggest issuers.
The new agreement means that credit cards branded by MasterCard
or Discover Financial Services still won't be accepted in Costco
stores. Costco will continue to accept Visa and MasterCard debit
cards.
The agreement calls for Citi to replace AmEx in issuing Costco's
co-branded credit cards. Citi already is a large issuer of such
cards that build loyalty among specific shoppers, providing cards
for the likes of hotel chain Hilton Worldwide Holdings Inc. and
Home Depot Inc.
Financial terms of the long-term agreements weren't disclosed.
Costco didn't provide many details of the new Citi card, saying
only that it "would provide generous rewards to Costco members."
The new deal goes into effect April 1, 2016.
The move comes just weeks after AmEx announced that its 16-year
relationship with Costco would end next year, representing a big
business loss for the card company. The partnership, which allowed
Costco customers to use their Costco-branded cards at other
merchants, is responsible for a big chunk of AmEx's spending.
Negotiations for the new deal had been ongoing for months.
Costco also had been negotiating with the card unit of J.P. Morgan
Chase & Co. and MasterCard Inc., according to people familiar
with the discussions.
Although shares of AmEx were pummeled when the company announced
the partnership would end, the latest news had less impact on the
new partners because their fortunes will be less tied to Costco.
For AmEx, Costco represented one of every 10 of its cards in
circulation and 8% of its spending.
Costco also said that Citi will purchase the existing Costco
card loans from AmEx. Those cards represented 10% of AmEx's loan
portfolio.
Shares of Citi were up 93 cents, or 1.7%, to $53.35 recently.
Visa was up $4.68, or 1.7%, to $275.96.
In the past decade, Costco has more than doubled its annual
revenue to $112.6 billion for the fiscal year ended Aug. 31 and
nearly doubled profits to $2.06 billion.
The Wall Street Journal previously reported that AmEx had
approached Costco several months ago to renew the relationship,
prompting the wholesale club to open up the process to other
potential partners, according to a person familiar with the
discussions. Costco had sought more favorable terms from AmEx, the
person said.
AmEx, which issues credit and charge cards and owns a processing
network, said it had been unable to reach a new agreement with
Costco on terms that "would have made economic sense" for the
company. It also won't renew its smaller co-brand card agreement
with JetBlue Airways Corp., according to people familiar with the
matter.
Write to Robin Sidel at robin.sidel@wsj.com and Angela Chen at
angela.chen@dowjones.com
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