Readers have been full of questions about the newly announced Citi Costco Anywhere Visa: What does it mean for credit scores? How do the rewards bonuses work? What are the fees and interest rates?
Before we tackle those, a little background: Costco has announced a new agreement with Citi and Visa to offer reward cards to its members. Beginning June 20, 2016, those American Express Costco cards will no longer work and Costco – which now accepts only American Express cards for credit payments – will accept only Visa cards. A new Citi Costco Anywhere Visa will be sent to American Express Costco cardholders in the next few weeks.
We answer several reader questions related to the switch:
Dear Cashing In,
Materials for the new Citi card say it offers “4 percent cash back on eligible gas worldwide, including gas at Costco.” But when you read the fine print, you find out that most gas stations will actually give only 1 percent back! Very deceptive, I think. – Bill
Dear Bill,
When the card was announced, one of the featured benefits, as you mention, is that it receives 4 percent cash back on “eligible gas.” When you read the details of the program terms, though, it says this: “You will only earn 1 percent cash back, not 4 percent, for gas purchased at superstores, supermarkets, convenience stores and warehouse clubs other than Costco or for fuel used for non-automobile purposes.”
That is setting off some alarm bells, given that 80 percent of all fuel in the U.S. is sold at convenience stores, according to the Association for Convenience & Petroleum Retailing (NACS), a trade group.
However, you shouldn’t worry. Here’s why: Card companies know what type of merchant you are charging at only via the merchant category code (MCC) that the card networks assign to individual businesses. Visa has separate codes for miscellaneous food stores/convenience stores (5499), service stations (5541) and automated fuel dispensers (5542). Supermarkets and warehouse clubs also have separate codes. Citi does not control how merchants are coded.
Citi confirmed to me that the Costco Anywhere Visa Card will give 4 percent at merchants classified as gas stations. In practice, most places where you pump gas are coded as gas stations, not as convenience stores – even if they are affiliated with a convenience store that offers the usual array of gum, lottery tickets, old-looking hot dogs and cold beer.
So rest easy. Your gas purchases probably qualify for the 4 percent cash back (and the purchases of hot dogs and cold beer at those places probably do, too).
Dear Cashing In,
Since there are restrictions on the gas rewards, are there also limitations on restaurants? – Bob
Dear Bob,
Yes. The program terms state that “You will only earn 1 percent, not 3 percent, for purchases made at bakeries and certain restaurants/cafes inside department, grocery or warehouse clubs.”
Again, it will depend on which merchant category codes qualify for the 3 percent and how a particular eatery is coded. There are separate MCCs for bakeries, bars/lounges and restaurants. The reason some purchases at cafes and restaurants inside department stores and grocery stores might not qualify is because those locations are often coded as department and grocery stores, not as separate restaurants.
Dear Cashing In,
Are there foreign transaction fees on this new card? – Johnny
Dear Johnny,
Yes. Costco says there will be a 3 percent fee on transactions made in a currency other than U.S. dollars, which is a typical amount for cards with foreign transaction fees. If you're traveling abroad, you'd be well advised to use a no-foreign transaction fee credit card.
Incidentally, if shopping at warehouse clubs figures into your vacation plans, Costco says there is no foreign transaction fee for charges at foreign Costco stores, although not every foreign Costco accepts Visa cards.
Dear Cashing In,
What is the APR of the new card? It doesn’t say anywhere in anything that they have sent, and I haven't been able to find the answer online, either. – Tanya
Dear Tanya,
Those details are apparently not available yet. Costco referred this question to Citi.
Citi spokeswoman Jennifer Bombardier told me: “Information on full terms and conditions – including interest rates – on the new Costco Anywhere Visa Card by Citi will be communicated to existing card members throughout April and May.”
Dear Cashing In,
Today, I received my American Express Costco statement with the full executive annual fee of $110. I’m wondering why they charged the full fee if the card is only good for 2.5 months? – Todd
Dear Todd,
Remember that although the American Express card is going away in mid-June, your Costco membership is a fee charged annually that allows you to buy things at Costco for a whole year.
The card has no annual fee. However, the Costco membership is an annual fee that is charged to the affiliated credit card, if you have one.
The date of your Costco membership renewal will stay the same. You will not be charged when the new Citi Visa is issued. Rather, you will be charged in a year.
Dear Cashing In,
Is anything about Costco’s Executive Membership program changing on June 20? – Gomtesh
Dear Gomtesh,
Costco says this card switch has no effect on its Executive Membership program.
Executive Membership, which costs $110, earns you 2 percent back on all purchases at Costco regardless of how you pay. An ordinary membership is $55, so if you spend at least $2,750 annually at Costco, the Executive Membership will pay for itself.
Beginning June 20, 2016, you could earn even greater rewards by combining a rewards-earning Visa card with an Executive Membership.
Dear Cashing In,
I have been a member of Costco since 1986, and I am sad to say I am canceling my membership. Why is Costco sharing my personal information with a financial institution and sending me a credit card that I did not authorize? How dare they! Adios Costco, hello Sam’s Club. – Steve
Dear Steve,
Costco hasn’t explicitly said why it is allowing Citi to take over the American Express accounts.
But since I have spent my career as a business reporter talking to corporate communications professionals, I can tell you that Costco would probably say that the company made a business decision to transfer providers of credit card services, and that it negotiated for Citi to take over accounts from American Express out of convenience to their customers, since those customers presumably liked having a Costco-affiliated card. That’s less disruptive (and coincidentally more profitable) than simply canceling all American Express cards and requiring Costco members to apply for the new Citi card.
They would probably add that the features of the new Citi card are similar if not superior to the one from American Express.
Dear Cashing In,
I do not want a Visa card from Citibank. I already have a Visa card. How do I make sure I do not receive a Citibank Visa? – Tim
Dear Tim,
Costco says you can call Costco’s call center at 800-774-2678.
You could also try canceling the American Express card now. But if Citi is already in the process of sending you one, you might have to wait until you receive it to cancel it.
Dear Cashing In,
I don't want another Visa Card. I already have one. Can I use my non-Citi Visa card at Costco? – Vince
Dear Vince,
Yes. Starting June 20, 2016, Costco will accept any Visa credit card in its stores – not just the Citi Costco Anywhere Visa.
Dear Cashing In,
My American Express Costco card is my oldest credit card. I am concerned that when the transfer to the Citibank Visa occurs, my credit history won't transfer. I am reading conflicting information online. Is there any way to find out if the age of my account will transfer as well? We are in the middle of the home-buying process, and this couldn't have happened at a worse time. I don't understand why my credit score should be affected by something we had no control over. – Vanessa
Dear Vanessa,
Ordinarily, if you close an account and open a new one, you would experience a slight, temporary reduction in your credit score. Typically, that’s not a big deal – unless you’re in the middle of buying a house or car, where having a higher score can help secure a better interest rate.
This case, though, appears to be different, according to CreditCards.com’s credit expert, Barry Paperno.
He told me: “From what I've read, there will be absolutely no scoring impact from this change, since essentially the same trade line will remain for the account with the only change being the card company name. … The former American Express account will not appear as closed, and there will be no impact on age of accounts, utilization or any other scoring factors. All in all, it will be as if that American Express trade line never existed and the Citi one has been there since the beginning of the account.”
Additional information is available on the Costco, Citi and American Express websites.
See related: Details emerge on new Citi Costco card switch, Costco cardholders need a new strategy, What to do when your retail store card switches banks
