Instant Analysis: Date Set for Costco Divorce From AmEx

By Markets Fool.com

What happened?
At long last, the big switch finally has a firm date.

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Costco Wholesale's True Earnings, the retailer's credit card co-branded with (and managed by) American Express , will no longer be accepted starting this June 20. It is to be replaced by a new product, the Costco Anywhere Card, a Visa credit product issued by Citigroup . The new date is a few months back from the originally planned handover of March 31.

IMAGE SOURCE: CITIGROUP.

The True Earnings cards will no longer be valid at Costco and will cease to be accepted anywhere.

According to Citigroup, the new cards will be mailed in May to existing True Earnings holders, who are being asked to destroy their existing cards once the June 20 switch rolls around.

Citigroup purchased the True Earnings portfolio from American Express earlier this year, for around $1 billion. Last year, Costco ended its relationship with American Express, which for over a decade and a half had been the exclusive credit card accepted at the retailer, as well as the co-branding partner for True Earnings.

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Visa will take over in the former position, in addition to being the brand used by Citigroup for Costco Anywhere.

Does it matter?
This is the final stage of the Costco-American Express split, and it'll affect both companies significantly. Costco is going to pay substantially less in fees to process those Visa transactions (some reports have it that this will be close to zero), while American Express is on the brink of losing a loan portfolio that comprised around of 20% its overall book.

The switch will be less impactful to Citigroup and Visa. The former has a massive credit card operation already, plus those skinny fees aren't going to improve either company's revenue stream by a significant amount. But, of course, it can't hurt that both are gaining thousands of new customers.

Regardless, it should be kept in mind that this is a story that has been developing for quite a while now. The divorce was announced over one year ago and the entry of Citigroup/Visa shortly after that, so the effects thereof have been baked into the respective stock prices for some time.

The article Instant Analysis: Date Set for Costco Divorce From AmEx originally appeared on Fool.com.

Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Costco Wholesale and Visa. The Motley Fool recommends American Express. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.