Dive Brief:

• It's Day One of the much-anticipated exclusive partnership between Costco Wholesale and Visa, which also means the retail no longer accepts American Express after that 17-year relationship broke down. Citigroup is Costco's new exclusive card issuer.
• BMO Capital Markets analysts have said the change of partners could help Costco save as much as $110 million to $220 million on lower fees.
• The new Costco Anywhere Visa Card by Citi pledges customer rewards like 4% cash back on gas, 3% on restaurant and eligible travel, 2% on purchases from Costco in-store or online and 1% on other purchases—increasing by 1% each what the American Express TrueEarnings card had offered on gas, restaurant and Costco purchases.

Dive Insight:

Much has been made of how negatively Costco has been impacted by this switch in the short-term, with last year's decision to to part ways with American Express contributing to a massive decline in fees the retailer collected from new credit card signups. 

The split also came at a time of some apparent weakness for Costco, as it has seen new membership growth slow recently. Breaking with a longtime partner certainly can create a lot of uncertainty, and if that translates to confusion and lack of purchasing activity on the part of Costco customers, Costco, Visa and Citi all may need to ride out a rough beginning to their relationship.

However, the new arrangement seems like a no-brainer for Costco at a time when the interchange fee fights between retailers and credit card networks are growing increasingly bitter. Just recently, Wal-Mart Canada said it would stop accepting Visa cards next month as fee negotiations between those two companies have hit the rocks.

If Costco can save $110 million or more by moving to a card partner that is willing to offer its customers better rewards, that seems like a solid strategy for boosting new credit card signups in the wake of last year's dip.

While slower growth in memberships could suggest other potential problems for Costco, the new deal with Visa and Citi also could offer a boost there, too, particularly if some folks were failing to sign up for cards through Costco mainly because they felt American Express was a bit stingy with its rewards.

You have to wonder what American Express is thinking. Was Costco too demanding for a retailer that has seen its membership growth slow? Does it feel like it's somehow jumping from a sinking ship? Costco's 11 million members represented about 10% of American Express' customers, so it will be very interesting to see how the card company replaces that business.