Is it time for Costco members to get a new credit card?
- Costco and American Express had a 16-year exclusivity agreement until 2016, when Costco switched to Visa.
- Costco has negotiated a partnership agreement with Visa in exchange for significantly lower processing fees, paying a transaction fee of just 0.4%.
- This allows Costco to continue to offer its low prices.
If you have ever shopped at Costco, you will know that the store only accepts certain types of credit cards for payment. This policy has been in place for many years, and can be confusing to many shoppers who wish to use a different credit card. For 16 years, American Express was the exclusive credit card company for Costco. Then in 2016, Costco ended its relationship with AMEX and appointed Citi as its exclusive credit card issuer and Visa as its new exclusive credit card network for Costco. So is Costco going to make the change and accept another type of credit card?
Currently, Costco’s US warehouse locations accept:
- All Visa Cards
- Costco Anywhere Visa® Card by Citi
- Most debit/ATM cards are PIN-based
- Costco Store Card
- Personal checks from current Costco Members
- Check the business of a current Costco Business Member
- Travel check
- EBT card
- Mobile payments (Apple Pay, Google Pay, Samsung Pay)
While you can only use Visa at Costco warehouse locations, at Costco.com, you can also use MasterCard and Discover Cards (including JCB and Diners Club). However, American Express is not accepted.
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Why are there no other credit cards?
The main reason no other credit cards are accepted is because of the exclusive partnership between Costco and Visa. Credit card processing fees typically range from 1.3% to over 3%. Costco has negotiated a partnership agreement with Visa in exchange for significantly lower processing fees, and pays a transaction fee of just 0.4%. This allows Costco to keep prices low. It will be difficult for other companies to compete with these low costs.
As long as this partnership remains in existence, it will be impossible for other types of credit cards to be accepted in stores. In addition, introducing additional credit cards can also create confusion among customers, many of whom are used to using only one type of card when shopping at Costco.
What to do if you are a Costco member
If you want to shop at Costco and use a credit card, you need at least one Visa credit card. Shoppers are also allowed to pay by cash, check, debit card and several other forms of payment. However, credit cards offer certain benefits, such as cash back, gifts, and free protections such as 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 wherever Visa is accepted. You can get:
- 4% on qualifying gas and EV charging for the first $7,000 fee per year, then 1% thereafter
- 3% for restaurants and eligible travel
- 2% on purchases from Costco and Costco.com
- 1% on all other purchases.
This card also functions as a membership card.
For now, it doesn’t look like we’re going to see any major changes to Costco’s credit card policies anytime soon. Toko currently enjoys a strong relationship with Visa. Introducing additional credit card options could disrupt this beneficial relationship as well as create confusion among customers who are used to using one type of card when shopping in stores. The Visa partnership also gives Costco the ability to keep their prices low!
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