For those who prefer buying in bulk, Costco is a great place to trim spending on household goods and help balance your budget. But the discounted prices aren’t the only way to benefit when shopping at the discount warehouse giant. Selecting the right credit card for your Costco runs is another way to maximize the financial benefits of your spending.
In addition to simply knowing what cards are accepted by Costco as forms of payment, some rewards cards simply make more sense for use at the store than others.
Only Visa is accepted
Perhaps the first thing to know about shopping at Costco is that not all credit cards are accepted—the discount giant accepts only Visa cards. It will not take Mastercard, American Express, or Discover as forms of payment.
“Most retailers are happy to accept cards from any of the big four American credit card networks, but not Costco,” says Matt Schulz, chief credit analyst for LendingTree. "That’s an important thing to understand…because the last thing you want to do is go up to the counter with a basket full of stuff and then find out that you can’t buy it because you only have a Mastercard.”
In 2016, Costco ended its long standing partnership with American Express and adopted Visa as its preferred credit card provider. It’s part of an exclusive business agreement that helps Costco secure lower processing fees from Visa, says Ted Rossman, senior industry analyst, Bankrate and CreditCards.com.
“The exclusive, however, is only for credit cards in-store,” says Rossman. Costco offers more flexibility when it comes to acceptable forms of payment for online purchases. According to the company’s website, online shoppers can also use Mastercard and Discover cards.
Costco is not considered a grocery store
Another point to keep in mind when using rewards credit cards at Costco is that the wholesale club is not considered a grocery store. This is an important distinction because it means that even if you fill your cart with food, you may not necessarily qualify for grocery rewards if you’re using a credit card that offers a bonus for that kind of purchase. It all depends on the terms of the agreement for your card.
“Just because you can buy groceries at Costco doesn’t mean that you can earn grocery credit card rewards when you shop there,” explains Schulz. “The same thing goes for Target, Walmart, and other mega-retailers that sell food.”
Credit card reward categories are determined by what’s known as a retailers’ merchant category code—not by the individual item you happen to purchase. And in the case of Costco, the discount warehouse club does not code as a grocery store.
But just because you won’t necessarily earn grocery rewards when using your credit card at Costco, doesn’t mean you don’t benefit at all. At the very least you could earn 1% cash-back for general purchases—sometimes you might earn even more.
Bottom line? Before heading to Costco, read the fine print of your credit card agreement to make sure you use the right cards and maximize your potential to earn points—or avoid accidentally missing out on points.
What are the best credit cards to use at Costco?
There are some rewards cards that can be particularly beneficial to use at Costco including many Capital One and Chase cards. In general, it’s a good idea to look for credit cards that offer higher rewards for general purchases in order to make the most of Costco purchases.
Capital One Venture Rewards Credit Card
- Unlimited 2X miles per dollar on every purchase
- New cardholders can earn up to 75,000 bonus miles if you spend $4,000 within first three months after opening an account
Capital One Venture Rewards Credit Card can be particularly valuable when shopping at Costco because it allows for cardholders to maximize the travel rewards they can earn on everyday purchases—2X miles for every dollar spent. “This means you could get at least $2 in travel value for every $100 you spend at Costco,” Rossman explains.
The card comes with a $95 annual fee. Qualifying for the card requires an excellent credit score.
Capital One Venture X Rewards Credit Card
- Unlimited 2X miles on everyday purchases
- New cardholders can earn up to 75,000 bonus miles if you spend $4,000 within first three months after opening an account, which is equal to $750 in travel
The Capital One Venture X Credit Card comes with a steep $395 fee but for serious Costco shoppers who spend a lot, there are also valuable rewards. New cardholders can earn 75,000 bonus miles after they spend $4,000 within the first three months of opening an account, and the Venture X offers an annual travel credit of up to $300, plus a 10,000 mile anniversary bonus (worth up to $100 toward travel).
This card also requires an excellent credit score to qualify.
Chase Freedom Unlimited®
- Unlimited 1.5% cash back on all purchases
- 0% purchase APR for 15 months (then 18.74%–27.49% variable)
- No annual fee
The Chase Freedom Unlimited offers 1.5% cash back on all purchases and there’s no annual fee, which can make using it at Costco particularly valuable.
And if you have other Chase cards that allow for transferring points, such as the Chase Sapphire Preferred® Card, using the Freedom Unlimited to pay for Costco purchases can pay off even more. For instance, you could transfer points earned shopping at Costco with your Freedom Unlimited to your Sapphire Preferred card, and then use cash in those rewards via Chase Ultimate, where your rewards are worth 25% more when redeemed for travel.
The takeaway
Costco is a great way to make your dollars go further and stretch your budget. But don’t miss out on ways to maximize the financial payback of your Costo shopping trips. Selecting the right rewards card can pay dividends when making purchases at the discount wholesale club.
