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Costco Card Move Makes Citigroup A Buy

Summary

Citigroup will start processing Costco credit cards in June.

The new card's terms should bring additional business with it.

If this gets the stock back to book value it's a 33% gain.

For the last year investors looking at Costco (NASDAQ:COST) have mainly been obsessed over the negative impact of its credit card move on American Express (NYSE:AXP).

Now that the files have been transferred, and new cards are in the mail, they should be looking instead at the impact on the winner, Citigroup (NYSE:C).

The new Citigroup Costco card will have rewards comparable with the best cards in the industry from Capital One (NYSE:COF). These include 3% on travel, 2% on all Costco purchases, and 1% on all other purchases.

This could have a huge impact on the "share of wallet" the new card enjoys, and the visibility that data gives Costco on its customers, most of whom are middle-to-high income (so they can afford the space to store what they buy). The old Costco...


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