Costco switches credit cards to Visa: What you need to know
A longtime checkout-line hassle for many Costco shoppers ends on June 20, when the popular wholesale club flips the switch on its new credit card policy. It will stop accepting听American Express and start taking only Visa 鈥� a dramatic changeover for a merchant听with about听81 million members worldwide.
The move听opens up Costco to a lot more credit cards. About听118 million people in the U.S. have at least one Visa card, about three times as many as have an American Express, according to the Nilson Report, an industry newsletter.
鈥淭he switch from American Express to Visa is a big win for consumers,鈥� says Sean McQuay, NerdWallet credit card expert. He adds that Citi鈥檚 new Costco card is 鈥渁 much richer card than the American Express incumbent.鈥�
Costco鈥檚 new rules
For 16 years, Issaquah, Washington-based听Costco Wholesale Corp., known as a place for bulk buying in super-sized shopping carts, accepted only credit cards with the听American Express label.听Last year, it听announced it would switch to Visa cards. The warehouse club also accepts听cash, checks, debit and ATM cards, Costco Cash Cards and Electronic Benefits Transfer cards for in-store purchases.
At the same time, Costco said it would switch its store-branded credit card from the TrueEarnings庐 Card from Costco and American Express to a new product, the听听by Citi. Those cards have been sent to TrueEarnings庐 Card from Costco and American Express cardholders.
June 19 is the last day Costco will accept the old co-branded cards or any others from American Express.
Good news for Visa issuers
Costco鈥檚 transition听has some of Visa鈥檚 biggest bank issuers vying for a share of the dollars spent there, which totaled $114 billion in 2015, according to the company鈥檚 annual report.
For example, the Chase Freedom庐 听听by extending its 5% cash-back bonus rewards for purchases at wholesale clubs, which was due to end June 30, through the end of the year. Elevated rewards apply not only to Costco, but also听to purchases at Sam鈥檚 Club and BJ鈥檚 Wholesale Club. And听Bank of America庐 added wholesale clubs as a bonus cash-back category for听its听BankAmericard Cash Rewards鈩⑻齝redit card.
鈥淪hoppers at wholesale retailers tend to spend more than the average consumer and also be more affluent 鈥� an ideal target customer for credit card issuers,鈥� McQuay says. 鈥淪ince Costco has opened its cash registers to all Visa cards, now all Visa-issuing banks can compete to offer better rewards at wholesale retailers. It鈥檚 a big win for consumers.鈥�
New card offers more rewards
Like the TrueEarnings庐 Card from Costco and American Express, the Costco Anywhere Visa庐听Card by Citi will double as a membership card. Customers can use it to make purchases at other stores, but听its cash-back rewards are redeemable only at Costco. It听has no annual fee, but to get it, you have to be a Costco member, which costs at least $55 per year.
Its rewards include:
- 4% back on up to $7,000 per year in gas purchases at Costco and other gas stations.
- 3% back at restaurants and on some听travel purchases.
- 2% back at Costco and on Costco.com.
- 1% back on everything else.
Shoppers have other options
The new Costco Anywhere Visa庐听Card by Citi is a solid听choice. But starting June 20, the Chase Freedom庐 听will be the best cash-back听card to use at the wholesale club 鈥� and at Sam鈥檚 and BJ鈥檚, too 鈥� through the end of the year because of the听5% cash-back听bonus.
These aren鈥檛 your only two options, though.听听might be a better fit for your lifestyle, or might already be sitting in your wallet. As always, though, if you plan to carry a balance from month to month, the interest could more than wipe out the value of your rewards. In that case, you鈥檙e probably better off using听a听.
Gregory Karp is a staff writer at NerdWallet, a personal finance website. Email:听gkarp@nerdwallet.com. Twitter:听.听
The article听听originally appeared on听.
