For a decade and a half, Costco Wholesale Corporation (NASDAQ:COST) has trained its customers to use an American Express (NYSE:AXP) card if they want to pay with plastic -- which many of them do.

However, the long-standing relationship between Costco and AmEx will come to an end on March 31, 2016, according to American Express. Costco is likely to replace its current AmEx exclusivity agreement with a different bank and credit card processing network, putting tens of billions of dollars of annual purchase volume up for grabs.

A big business

For 16 years, American Express has been the exclusive credit card for Costco's U.S. business. It also issues a co-branded "TrueEarnings" credit card with Costco that offers 3% cash back at gas stations, as well as 2% cash back on restaurants and travel and 1% back on everything else. The co-brand card also doubles as a Costco membership card.

American Express is currently the only credit card accepted at Costco. Photo: The Motley Fool

Costco warehouses also accept cash, checks, and debit cards, but the company has typically opted for an exclusive credit card relationship. This allows Costco to keep its prices down by negotiating significantly below-market credit card fees.

Having exclusivity at Costco is a pretty big deal. Costco's U.S. sales surpassed $80 billion in its most recent fiscal year. That makes it the third-largest retailer in the country. Costco also tends to attract a fairly affluent demographic -- like American Express.

As a result, Costco has become a significant part of AmEx's business. Costco co-branded cards represent about 10% of all American Express cards and 20% of the American Express loan portfolio is tied to Costco cards.

American Express had hoped to retain this business, and so it began renewal negotiations with Costco more than a year before the agreement was set to expire. However, Costco wanted even better terms than it had under the existing arrangement, leading AmEx to eventually walk away.

What next?

American Express' management has warned investors that ending the Costco partnership will throw the company off of its long-term earnings growth trajectory. In preparation for losing the Costco co-brand card, American Express will ramp up its marketing spending this year. One of the goals will be to convince TrueEarnings card members to switch to other AmEx cards.

American Express will attempt to replace the lost Costco business with new co-brand credit card agreements. Photo: The Motley Fool

As a result, EPS will be flat to down in 2015, followed by modest growth in 2016. American Express doesn't expect to resume its long-term 12%-15% EPS growth trend until 2017.

In the long run, American Express thinks it can replace the lost Costco business with other co-branded card relationships that may go out for bid in the next few years. Losing the Costco business may also improve American Express' discount rate -- the percentage of purchase volume that it keeps for itself -- since Costco has been paying a significantly lower rate.

Meanwhile, Costco will have no trouble finding another bank and processing network to replace American Express in its stores. In Canada, when the Costco-AmEx partnership ended at the end of 2014, Capital One and MasterCard stepped in. MasterCard is now the exclusive credit card network for Costco in Canada, and Capital One issues the new Costco co-branded credit card there.

MasterCard remains the front runner to get Costco's U.S. business. But this time, either J.P. Morgan Chase or Citigroup may get the Costco co-branded credit card, according to The Wall Street Journal.

Whatever the ultimate outcome, the end of the long partnership between Costco and American Express will represent a big shift in the U.S. credit card industry. Costco is clearly the big winner. With multiple suitors, it will be able to negotiate an even more favorable credit card deal than its current arrangement with American Express, creating a nice margin tailwind.

On the other hand, while Costco's new credit card partners will have pulled off a big coup, they also will have to pay a steep price. In the long run, this could lead to buyer's remorse.