CultureCultureCostco, the retail giant known for its bulk savings and membership model, has made a subtle but impactful change to its co-branded credit card program. A recent amendment to its agreement with Citibank introduces a tiered interest rate structure for the Costco Anywhere Visa Card, a move that could see some members paying hundreds more in annual interest, depending on their credit score.
The alteration, filed with the Securities and Exchange Commission in September 2024, primarily extended the partnership between Costco and Citibank through June 19, 2029. However, it also quietly replaced the card's previous single purchase Annual Percentage Rate (APR) with a risk-based pricing model. This means that cardholders with lower FICO scores, who are considered a higher risk, will now face a purchase APR up to eight percentage points higher than those with top-tier credit.
Citi's current disclosures indicate that the Costco Anywhere Visa APR now ranges from 18.74% to 26.74%, with these rates tied to the Prime Rate, which was 6.75% as of December 2025. For a cardholder carrying a $5,000 balance, the difference between the lowest and highest interest tiers could translate to approximately $400 in additional annual interest. This tiered pricing system became effective for new co-branded card accounts by October 31, 2024, with existing cardholders beginning to receive formal change-in-terms notices in November 2024.
This recent adjustment is part of a dynamic history for Costco regarding its credit card affiliations. For an impressive sixteen years, Costco maintained an exclusive partnership with American Express, with AmEx cards being the only ones accepted at its U.S. warehouses and online. This arrangement was a substantial part of American Express's operations, reportedly accounting for 8% of its billed business, or $80 billion, and approximately 20% of its interest-bearing credit portfolio, totaling $14 billion. The long-standing deal even included co-branded Costco membership cards since 2004.
However, this extensive relationship began to dissolve in January 2015 when Costco's Canadian operations ended their exclusive American Express deal, opting instead for a partnership with Capital One and Mastercard. Just weeks later, in February 2015, American Express publicly announced its inability to reach an agreement with Costco to renew their U.S. partnership, which was set to expire in March 2016. At the time, Kenneth I. Chenault, then Chairman and CEO of American Express, stated that despite discussions, "we were unable to reach terms that would have made economic sense for our Company and shareholders." Following this announcement, American Express shares reportedly saw a 6.4% decline.
Costco quickly moved to secure a new partner. In March 2015, the warehouse giant announced a new long-term co-brand credit card program agreement with Citibank and an acceptance and co-brand incentive agreement with Visa. Citibank, described as a major issuer of consumer credit cards, became the exclusive issuer for Costco's co-brand cards, and Visa replaced American Express as the exclusive credit card network for Costco in the United States and Puerto Rico. This new arrangement officially took effect on April 1, 2016, with the transition completed by June 20, 2016, ending Costco's 17-year run with American Express. Existing American Express Costco cardholders automatically received new Visa credit cards from Citi. Analysts at the time projected this shift could save Costco between $110 million and $220 million annually in lower card-acceptance costs.
The strategic decisions around credit card partnerships have always been closely tied to Costco's core business model. Regarding the earlier split with American Express, Kenneth I. Chenault had expressed pride in "the value created over many years for Costco, for our Card Members and for our shareholders," while noting the company's intent to "focus on opportunities in other parts of our business where we see significant potential for growth and attractive returns." When the new Citi/Visa deal was announced, S&P Capital IQ analyst Erik Oja viewed it as "a strong positive for V and a incremental positive for larger C," referring to Visa and Citibank respectively.
More recently, Costco executives have spoken on efforts to enhance membership value, though the tiered APR change received considerably less public attention than other initiatives. In January 2025, Costco increased the cash back rewards on gas purchases at its own fuel stations from 4% to 5% for Citi cardholders. Costco CFO Gary Millerchip commented on this, stating, "We're committed to continuing to improve the value of the membership," and "We've made obviously some major changes recently with the extended opening hours and the Instacart benefits and 5% gas on the credit card, but we'll continue to look for ways to add greater membership value." Costco CEO Ron Vachris has consistently underscored the importance of the membership card, reportedly stating, "The most important item we sell is the membership card," and "Everything we do supports that transaction."
These executive statements highlight Costco's unique business strategy, where membership fees contribute significantly to its profits, allowing the company to operate with thin margins on its products. The introduction of risk-based pricing for the Costco Anywhere Visa Card, while a quiet move, aligns with a common practice across the consumer credit industry. The Consumer Financial Protection Bureau defines risk-based pricing as the practice of "setting or adjusting the price and other terms of credit offered or extended to a particular consumer to reflect the risk of nonpayment by that consumer." This approach allows lenders to tailor interest rates based on an individual's perceived creditworthiness.
For many members, the Costco Anywhere Visa is not just a credit card but also serves as their Costco membership card, integrating deeply into their shopping experience. While the increase in gas rewards offers a tangible benefit, the simultaneous and less-publicized shift to tiered APRs means that some members could see their overall costs rise significantly. This dual approach illustrates the complex balance retailers must strike between offering attractive perks and managing financial risk.
As the new tiered interest rates take full effect and existing cardholders receive their notices, the financial implications for some could be substantial. This change serves as a reminder for consumers to closely monitor the terms and conditions of their credit products, especially those linked to loyalty programs. For Costco, it represents another strategic adjustment in its long-term financial partnerships, continuing to evolve how it manages its co-branded credit offerings while aiming to reinforce the value of its membership.