What Credit Cards Does Costco Accept?

Before joining Costco, the nation’s largest warehouse club for members only, it’s important to get the facts straight when it comes to credit cards. It’s not always clear what Costco payment methods are available for customers when it comes time to pay the bill. Costco has a long history of limited credit card acceptance at the cash register.

Historically, Costco only accepted American Express (Amex) cards at their nationwide network of store locations going back to 1999. Anyone without an Amex card would need another form of payment to shop at the warehouse retailer. Before American Express, Costco would only accept Discover cards. Being picky about credit card acceptance may be frustrating for members, but it helps Costco keep their prices lower for members. So, if you find yourself asking “what credit cards does Costco take?” you may want to read on to know for sure.

Changes to Credit Card Policy

In 2016, Costco renegotiated their credit card agreements yet again. American Express was out, and Visa was the new exclusive credit card for Costco shoppers. Costco payment methods for customers included the use of cash, debit, or a few other methods, but when it comes to credit cards, the only option is Visa.

Ever since the switch away from Amex, Costco members need a Visa-branded card for in-store purchases. Unlike American Express, Visa offers a wide range of cards through many different financial institutions and retailers. The selection for consumers is much wider compared to a smaller credit card provider. Additionally, Costco even has its own Visa store-branded card which of course, can be used at Costco.

It’s easy to see why Costco chose Visa over American Express or Discover. American Express cardholders number roughly 24 million in the United States, whereas Visa has over 270 million customers. The choice was clear to Costco so long as the numbers made sense. When the two companies struck an agreement in 2015, Costco got the benefit of a bigger population of potential customers with the right card in their wallet.

Visa partnered with Costco to offer a new store-branded card as part of the provider switch. In partnership with Visa and Citi, Costco members can now apply for the Costco Anywhere Visa to unlock generous rewards and benefits, inside and outside Costco stores. Gas purchases, in-store purchases, restaurant meals, and many other types of purchases carry extra cash-back bonuses for cardholders. Rewards are typically redeemable at a Costco store to help cardholders save on their purchases at the warehouse retailer.

How Does a Sole Credit Card Option Save Money for Costco Members?

Every swipe of a credit card carries certain fees for the merchant. Every payment network (debit, credit, online, etc.) relies on transaction fees to cover the costs of running the network and earn a small profit for the payment platform provider. While the customer never sees the fees, the cost of all those credit card processing payments comes out of the profit margin for Costco. To operate a successful business, it’s important to pass on variable costs to customers in the form of higher prices.

Each credit card company offers slightly different payment processing rates (aka discount rates or interchange fees) under different conditions. Larger merchants typically enjoy discounts for a high volume of transactions and overall money flow. When a large retailer like Costco can negotiate a good rate for its credit card processing, everything in the store becomes a little bit cheaper to buy if the payment comes via credit card.

Instead of charging different prices for different payment methods, retailers usually average out the different costs for different payment methods. Everyone pays the same whether they use cash, debit, credit, EBT cards, or gift cards. A lower interchange fee means less profit for Visa, but the executives at Visa were probably celebrating after the news and happy to win all of Costco’s credit card business on an exclusive contract.

It’s important to remember that Costco cashiers take in hundreds of millions of dollars in credit card payments each year. Each swipe earns Visa a fee that used to go to American Express on the prior exclusive contract. It’s a good deal for both companies as long as Costco members adapt to the switch without too much frustration at the new credit card policy.

It may be an inconvenience for some Costco members to apply for a new Visa or use a different payment method. Overall, the benefit of lower operating costs does flow to customers in the store. Costco shopping is about the essentials: no fancy displays or showcases. The company does everything it can to run a lean, mean operation with the best prices for its members.

Costco can help a family save hundreds of dollar each year on essentials such as food, gas, furnishings, and appliances. There’s a reason they can accept EBT – they sell the things people need to live comfortably in modern life.

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