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Is it time for Costco members to get a new credit card?
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If you’ve ever shopped at Costco, you’ll know that the store only accepts a few types of credit cards for payment. This policy has been in place for years, and it can be confusing to many shoppers who are eager to use other credit cards. For 16 years, American Express was the exclusive credit card company for Costco. Then in 2016, Costco ended its relationship with AMEX and named Citi as its exclusive credit card issuer and Visa as its new exclusive credit card network for Costco. So, will Costco make any changes and accept another type of credit card?
The current situation
At present, U.S. Costco warehouse locations accept:
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All Visa CardsCostco Anywhere Visa® Card by CitiMost PIN-based debit/ATM CardsCostco Shop CardsCashPersonal checks from current Costco MembersBusiness checks from current Costco Business MembersTraveler’s checksEBT cardsMobile payment (Apple Pay, Google Pay, Samsung Pay)
While you can only use Visa at Costco’s warehouse locations, on Costco.com, you can also use MasterCard and Discover Cards (including JCB and Diners Club). American Express is not accepted, however.
Why no other credit cards?
The main reason why no other credit cards are accepted is because of an exclusive partnership between Costco and Visa. Credit card processing fees normally range from about 1.3% to more than 3%. Costco has negotiated a partnership agreement with Visa in exchange for much lower processing fees, and pays transaction fees of only 0.4%. This allows Costco to keep prices low. It would be difficult for any other company to compete with these low fees.
As long as this partnership remains in place, it’s unlikely that any other type of credit card will be accepted in-store. Furthermore, introducing additional credit cards could also create confusion among customers, many of whom are accustomed to using just one type of card when shopping at Costco.
What to do if you’re a Costco member
If you want to shop at Costco and use a credit card, you will need at least one Visa credit card. Shoppers are also allowed to pay by cash, checks, debit cards, and a few other forms of payment. Credit cards, however, offer certain advantages, such as cash back, rewards, and complimentary protections like purchase protection, travel insurance, no foreign transaction fees, and extended warranty coverage.
Costco also offers members the Costco Anywhere Visa® Card by Citi, which allows cardholders to earn Costco cash rewards anywhere Visa is accepted. You can earn:
4% on eligible gas and EV charging for the first $7,000 in charges per year, and then 1% thereafter3% on restaurants and eligible travel2% on purchases from Costco and Costco.com1% on all other purchases.
This card also doubles as a membership card.
For now, it seems unlikely that we’ll see any major changes to Costco’s credit card policy anytime soon. The store currently enjoys a strong relationship with Visa. Introducing additional credit card options could disrupt this profitable relationship while also causing confusion among customers who are used to using one type of card when shopping at the store. The Visa partnership also gives Costco the ability to keep its prices low!
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Alphabet, Costco Wholesale, Mastercard, and Visa. The Motley Fool recommends Discover Financial Services and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
