How Citi’s New Costco Card Stacks Up

Citi

Costco’s customers will soon have their Citi co-branded credit card in hand.

Citi announced late last week that the cards would begin shipping in order to replace the American Express cards that will end as part of the relationship between Amex and Costco ending over the next few months after a 16-year relationship.

Dubbed the Costco Anywhere card, Citigroup said cardholders do not need to do anything special to have the card arrive. Those new cards can then be used starting June 20, which coincides with when the Amex cards will officially be canceled. But the real question cardholders want to know the answer to is how the different cards stack up in terms of rewards.

Well, it appears for now that the benefits are a bit better. For example, the Citi-Costco cards will offer 4 percent cash back on up to $7,000 worth of gas purchases per year. In comparison, Amex offered 3 percent for up to $4,000. Citi’s card will also offer a 3 percent cash back offer for restaurants, compared to Amex’s 2 percent.

And this may be at the crux of Amex’s struggles at the moment — making its rewards appealing to all consumers. But Amex does offer things like 3 percent cash back on grocery purchases for its Blue Cash Everyday card. But that comes with a cost. According to Credit Suisse estimates, the rewards for that card are actually 70–80 percent more costly on Amex, which is something its shareholders may not see the benefit of.

“Citi’s new Costco Anyway card is significantly more appealing than Amex’s TrueEarnings Costco card. Costco’s management has stated that the terms Citi offered were too compelling for Costco to stay with Amex,” analysts wrote.

Amex’s program brought in $20 billion in spending on the co-brand card deal, along with another $60 billion of spending on other merchants using the card.

“While Citi’s new Costco card illustrates the ever-growing competitiveness of the rewards space by offering more attractive cash-back rates than the old Amex card, which we note will not be limited to just purchases within the U.S., the Costco card also acts as the membership card for the Costco club member and, as such, will likely dominate in-store sales … We would expect the Citi/Costco partnership to aggressively pursue increased Costco membership, dominate in-store spending and generate significant spending outside the store,” the Credit Suisse analysts’ report continued.