Skip to main content

File photo of shoppers leaving a Costco outlet in New York.Suzanne DeChillo/The New York Times

Costco Wholesale Corp. will switch to accepting MasterCard Inc. rather than American Express Co. credit cards in Canada next year after talks broke down between the U.S. retail giant and AmEx.

Capital One Financial Corp. will soon offer a new co-branded MasterCard for Costco members in this country, serving as both a credit card and a Costco membership card, the companies confirmed late Thursday.

David Sherwood, director of financial planning and investment relations at Costco, said the U.S.-based retailer approached the negotiations with AmEx in the same way it deals with procuring other goods and services. "We go out there and basically try to get the best deal for our members to allow us to operate at the most efficient rate."

The Costco and AmEx contract expires on Dec. 31. "I would assume we were able to get better terms elsewhere," Mr. Sherwood said.

The end to a 15-year partnership between Costco Canada and New York-based AmEx suggests a rift between the two companies that have worked closely together, raising questions about whether they will continue to team up for the longer term in the chain's core U.S. market.

But Costco's U.S. stores will continue to accept AmEx cards, the company said. The exception is with the TrueEarnings and American Express Platinum Cash Rebate cards issued in Canada.

"The contract was up for renewal" between AmEx and Costco Canada, said AmEx spokesman David Barnes. "We weren't able to come to terms."

Costco and AmEx announced in 2010 that they were teaming up to introduce a rewards card for Canadian customers. Costco runs 88 stores in Canada and 468 in the United States and Puerto Rico, with another 107 outlets in seven other countries, its website says.

The Costco relationship represented a "sizable portfolio" for AmEx in Canada, Mr. Barnes said without providing details.

Both companies also have ties to Berkshire Hathaway Inc., which is run by billionaire investor Warren Buffett. Berkshire is AmEx's biggest investor and its vice-chairman, Charles Munger, has sat on Costco's board for more than 15 years. Berkshire also has a stake in Issaquah, Wash.-based Costco.