• by Thom Forbes  @tforbes, March 3, 2015

If “Everywhere you want to be” includes loading the conveyor belt at the checkout line in Costco, you’re in luck. Starting in April 2016, Visa will replace American Express as the exclusive credit card at the 474 warehouse outlets in the U.S. and Puerto Rico. Citigroup with be the issuer and co-brand on the card that bears gifts such as yearly rebates, but any Visa card will be legal tender. The retailer will still accept Visa and MasterCard debit cards, as well as cash.

The maneuver illustrates how the Issaquah, Wash.-based Costco “is constantly on the lookout for deals, in this case lower processing fees from credit-card issuers,” points out Ángel González in TheSeattle Times. “Costco’s huge scale — as the second-largest global retailer after Wal-Mart Stores, according to the National Retail Federation — means bargaining power.”

“The implementation of these agreements is subject to the purchase of the existing co-brand credit card portfolio by Citi,” according to a brief Costco release about the news that goes on to say that it “will provide its members with additional information in the coming months regarding the anticipated transition from its existing co-brand credit card program.”

“The retailer expects the existing portfolio to be sold, spokesman Bob Nelson said,” reports Javier Panzar in the Los Angeles Times. “When that happens, existing Costco members will have their new cards sent to them.”

“It isn’t clear yet what it all means in terms of rewards, which is a key reason why Costco shoppers like having a Costco-branded card in the first place,” observes Robin Sidel in TheWall Street Journal. “Costco didn’t provide many details of the new Citi card, saying only that it ‘would provide generous rewards to Costco members.’”

“Exclusive credit card deals with Costco are widely viewed as lucrative for both partners,” writes Kevin McCoy in USA Today, pointing out that “… many Costco members' accounts are linked to their card and require only one annual payment for the co-branded card and Costco membership.”

The Costco card represented about 8% of AmEx’s business last year. However, when AmEx chairman and CEO Kenneth I. Chenault made the announcement on Feb. 12 that its 16-year relationship would come to an end on March 31, 2016, he said: “We were unable to reach terms that would have made economic sense for our company and shareholders.”

The WSJ’s Sidel points out that “Visa already dwarfs AmEx in terms of the number of cards that are in shoppers’ hands” with 281.4 million in circulation compared with 54.9 AmEx cards, according to the Nilson Report.

Indeed, “Visa credit cards were the second most popular card brand at merchants last year” with purchase volume up 12.4% to $1.213 trillion,” according to a release for a recent report in the newsletter, trailing only Visa debit cards, which garnered $1.272 trillion in purchase volume last year, up 7.1% versus 2013.

Warren Buffet, whose Berkshire Hathaway is AmEx’s largest shareholder, was nonplussed by the announcement in an wide-ranging interview on CNBC’s “Squawk Box,” as Bloomberg Business’ Elizabeth Dexheimer reports.

“Somebody was going to get the bid, and American Express learned a week or two ago that they were not the one that was going to get it,” he said. “I don’t know the terms of the new deal, but I don’t think Citi will get rich off of it."

But analysts seem to like the prospects for Citigroup, if those cited by Reuters’ Avik Das and David Henry are any indication.

“The Costco portfolio of card loans has been a ‘thin margin’ business, but Citigroup — the world's largest credit card issuer — has the scale, with some $146 billion of card loans, to manage it, analyst Glenn Schorr of Evercore ISI wrote in a note,” they write.

“Costco is a solid co-brand partner given its affluent, captive member base and represents a solid win for Visa,” J.P. Morgan Securities analyst Tien-tsin Huang wrote in a note. And “it was an ‘impressive win’ for Visa,” according to Stifel Nicolaus analyst John Davis, “considering that 90% of Citi's U.S. credit cards are MasterCards.”

In any event, the rewards were immediate — if perhaps ephemeral — for both Visa and Citigroup shareholders. The former closed up 2.57% at 278.29 yesterday; the latter rose 2.04% to 53.14.