American Express, Costco Partnership to End Next Year

American Express announced today that its partnership with Costco will end next year on March 31, 2016. This comes on the heels of the recent September decision to sever ties in the Canadian AmEx, Costco partnership.

The current agreement continues until March 2016, after which time the 16 year old exclusive partnership between the two will end. Costco currently only accepts AmEx cards as payment to the exclusion of any other credit and debit cards.

AmEx CEO Kenneth I. Chenault said in a statement:

We are proud of the value created over many years for Costco, for our Card Members and for our shareholders. Taking a very disciplined approach, we began discussions on a possible renewal with Costco well in advance of the contract expiration. However, we were unable to reach terms that would have made economic sense for our Company and shareholders. Instead, we will focus on opportunities in other parts of our business where we see significant potential for growth and attractive returns over the moderate to long term.

 

Costco will likely enter an agreement with a different card issuer; in Canada it was Capital One and Mastercard who took over as the new Costco partner. Others mention Discover as a possible partner.

Reuters puts the number of Costco sales at nearly 8% of the worldwide spend on AmEx cards, and the company expects the move to hurt earnings for the next two years. AmEx shares were down 6.1% on the NYSE today.

We’ll have to wait and see what happens to the True Earnings credit card from Costco and AmEx. It’s still being offered by Amex; presumably it will be pulled eventually. Old cards may get shut down or possibly product-changed to a different card.

Update from Will: I predicted this in my post about Barclaycard & JetBlue, now I just need the changes to the American Express platinum to come to fruition and I’ll be the Nostradamus of credit cards.