29 Sep The death of Costco AmEx card and your credit score

Q. I have a Costco AmEx with a $19,000 limit that expires in February 2016. Because the companies have parted ways, I won’t renew the card. Will my credit rating take a hit? (My credit score is 846 out of 900). And what would it look like on my credit report?

A. You’re smart to ask about the impact on your credit score before you act.

Costco has replaced American Express with Citi and Visa, so Citi is its new credit card partner and Visa will be the payment network that’s used for the new card, said Beverly Harzog, consumer credit expert and author of “The Debt Escape Plan: How to Free Yourself from Credit Card Balances, Boost Your Credit Score, and Live Debt-Free.”

But right now, there’s not enough information out there are how this change will happen.

“For instance, if Citi buys AmEx’s card portfolio, which is a possibility, then the True Earnings cardholders would just receive new co-branded Costco and Citi Visa cards,” Harzog said. “This would be an easy transition if you liked the terms and the rewards for the new card.”

Harzog said because you have excellent credit, there’s a chance you’ll be offered the new Costco and Citi Visa card. The card will become effective on April 1, 2016.

The Costco and American Express partnership doesn’t end until March 31, 2016, so you don’t have to make a decision right away.

“You might consider waiting until you have more information about the new card in case you’ll benefit from it,” Harzog said.

But if you do decide to close the account outright, yes, it can negatively impact your credit score.

A closed account might stay on your credit report for up to 10 years, so losing the history isn’t your immediate concern, Harzog said.

“The bigger issue is the $19,000 in available credit that you’ll lose,” she said. “Your credit utilization ratio is the amount of credit you’ve used compared to the amount of credit you have available. Your ratio should be under 30 percent, but closer to 10 percent is even better if you’re trying to maximize this part of your score.”

Here’s an example of how it works, courtesy of Harzog. Let’s say you have two credit cards. Your Costco card has a $19,000 limit and we’ll assume you have another card with a $20,000 limit. Your total available credit is $39,000. If you have a total of $7,000 in credit card purchases at the moment, this means your ratio is only 17.9 percent (7,000 / 39,000). But if you lose the $19,000 in available credit from your Costco card, then your ratio shoots up to 37 percent, which could lower your credit score (7,000 / 20,000).

Harzog said one way to close the account and limit the impact on your score is to apply for a new card to replace the available credit on your Costco card. If your new card offers you around a $19,000 limit, then this helps replace the available credit you’ll be losing. Timing issues could cause temporary ding to your score, but it should bounce back, she said.

Another issue to consider before you close your account is the rewards that you’ve earned this year.

“Rewards for the True Earnings card are distributed every year in the form of a coupon on the last page of your February statement,” she said. “If you wait until then, you still have time to close the account before the partnership ends.”

And before you close the account, Harzog said, make sure your balance is zero.

Then call customer service at American Express and formally notify them you’re closing your account.

“Tell the rep that your balance is zero but also ask for confirmation of that. Document the time of your call and who you spoke with,” Harazog said. “It’s also a good idea to send a letter to AmEx letting them know you called and closed your account.”

She said if you close the account yourself, your credit report will show that the cardholder closed the account and this should not reflect badly on you.

Finally, if you decide to wait until you get your rewards in February, be on the lookout for any communication from either American Express or Citi in case there are any announcements about a new card or steps you need to take.

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This story was first posted in September 2015.