After a 16-year partnership, Costco announced the end of its relationship with American Express in 2016. Sadly, this news also served as the death knell for Costco’s popular co-branded credit card, which was offered through American Express.
But Costco wasn’t quitting the credit card game – not by a long shot. Instead of partnering with American Express, they launched a new co-branded credit card with the help of Citigroup and Visa.
While Costco credit card users may have been initially dismayed by the change, they have plenty to celebrate now. In fact, the brand new card is much more appealing than its predecessor. Let’s take a look at the new benefits you can score by signing up for the new Coscto Visa credit card:
The New Costco Visa at a Glance
- Costco’s new Visa card offers 4% cash back on your first $7,000 in gas purchases each year, up from 3% with the old version of the card.
- The new card offers 3% back on travel and dining purchases, including international dining! The older American Express version of this card, on the other hand, offered just 2% and excluded restaurants abroad.
- All other Costco purchases made with the new card will earn 2%, an improvement from the 1% back on all purchases offered by the old version of the card.
- This card comes with no annual fee, although you do have to spring for an annual Costco membership to qualify.
- You can redeem your rewards for shopping vouchers to use at Costco.
Verdict: The Perfect Card for People Who Shop at Costco Anyway
If you live near a Costco and already have a membership, the new Costco credit card will be an absolute no-brainer. While it doesn’t come with a signup bonus, it does offer an amazing 4 percent cash back on your first $7,000 spent at gas stations worldwide, plus 3 percent back on dining and select travel purchases, and 2 percent back on all other Costco purchases. As a Visa card, this card can also be used anywhere Visa is accepted. For all purchases that fall outside of one of the “bonus categories,” you’ll earn the standard 1 percent cash back. No matter how you look at it, that isn’t bad at all.
If you already have a Costco membership, which runs around $55, and shop there quit a bit already, you could save a ton of money by signing up for the new Costco card. If you drive a lot and manage to max out the gas benefit, for example, you can score an easy $280 in cash back every year. And if you load up on groceries and essentials at Costco, you could easily earn a whole lot more.
As an example, let’s say you spend around $1,000 on groceries, toiletries, and personal care items at Coscto each month. At the end of the year, you’ll have another $240 in rewards to spend – and all for buying items you would have purchased anyway.
The New Costco Credit Card: Where It Falls Flat
Of course, the new Costco Visa credit card won’t be perfect for everyone. If you don’t live near a Costco or have no desire to buy in bulk, for example, you wouldn’t benefit much from this card.
Second, you have to visit your local Costco to redeem your rewards. If you don’t mind the extra step, then that might not be a big deal. However, this is far and away less convenient than most other rewards credit cards that allow you to redeem your rewards online in whatever way seems fit.
Who This Card Is Good For:
- Costco shoppers
- People who have thought about trying Costco in the past, but needed an incentive
- Those who are flexible in how they redeem their rewards
Who Should Pass:
- People who want to earn rewards for travel
- Those who want to earn a signup bonus
- Anyone who doesn’t shop at Costco
How Does It Compare to Other Grocery Cards?
To see how the new Costco card might compare to other cards you would use at the grocery store, we compared its benefits to the Blue Cash Preferred® Card from American Express. Here’s what we found:
|New Costco Visa Card||Blue Cash Preferred® Card from American Express|
|Annual Fee||$0, but you do need a $55 membership||$95|
|Intro Bonus||$0||$200 after you spend $1,000 within the first 3 months. Terms Apply.|
|Earnings Structure||Earn 4x points on $7,000 in gas spending, 3x points on dining and select travel purchases, 2x points at Costco and Costco.com, and 1x points on all other purchases||Earn 6% at U.S supermarkets on up to $6,000 per year in purchases (then 1%); 3% at U.S gas stations and at select U.S. department stores; 1% other purchases. Terms Apply.|
|Rewards Options||Redeem points for Costco vouchers||Earn statement credits you can use anywhere|
As you can see, the Blue Cash Preferred® Card from American Express comes out ahead in several respects. First, it offers a full 6% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%). And second, it offers a welcome bonus.
Lastly, the Blue Cash Preferred® Card from American Express comes out way ahead in terms of flexibility. Unlike the Costco card that offers the most points when you buy gas and groceries at Costco stores, the Blue Cash Preferred® Card from American Express lets you earn the “extra points” no matter where you spend your money. If you like to shop at several stores or don’t like going to Costco every time you need gas or groceries, this flexibility can be extremely important.
The Costco card, on the other hand, looks slightly better if you spend a ton of money on gas every month and stand to benefit from earning 4 percent back in that category. Second, it doesn’t charge an annual fee at all – unless, of course, you count the Costco membership, which you need to purchase anyway if you already shop there. The Blue Cash Preferred® Card from American Express, on the other hand, does charge a $95 annual fee. If you’re fee-averse, that is definitely something to take into account.
Best Strategy with the Costco Credit Card: Pair It with the Blue Cash Preferred® Card from American Express
If you spend a ton of money at U.S. gas stations and U.S. supermarkets but don’t want to be tied down to Costco for all of your grocery spending, you could really benefit if you signed up for both the Blue Cash Preferred® Card from American Express and the new Costco credit card.
To maximize both cards, you could:
- Use your Costco credit card for toiletries and household essentials for 2 percent back, plus earn 4 percent back on your first $7,000 in gas station purchases.
- Use your Blue Cash Preferred® Card from American Express for your first $6,000 in U.S. supermarket spending at non-Costco stores each year, then switch your grocery shopping to Costco to earn 2 percent back after that.
- Use your Blue Cash Preferred® Card from American Express to earn 3 percent back at U.S. gas stations after you have maximized the Costco gas benefit.
- Use your Costco credit card on dining and travel purchases to earn 3 percent back.
By using both cards in their respective “bonus categories,” you can earn a lot more cash back over the course of a year. Just remember, your Costco rewards can only be used at Costco stores. Statement credits from American Express, on the other hand, can be used to cover nearly any expense.
Blue Cash Preferred® Card from American Express
- $200 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months.
- 6% cash back at U.S. supermarkets (on up to $6,000 per year in purchases, then 1%) - that means spending $60 a week at U.S. supermarkets could earn over $180 back per year.
- 3% cash back at U.S. gas stations and at select U.S. department stores, 1% back on other purchases.
- Low intro APR: 0% for 12 months on purchases and balance transfers, then a variable rate, currently 14.74% to 25.74%.
- Over 1.5 million more places in the U.S. started accepting American Express® Cards in 2017.
- Cash back is received in the form of Reward Dollars that can be easily redeemed for statement credits, gift cards, and merchandise.
- $95 annual fee.
- Terms Apply.
- See Rates & Fees
Want Flexible Rewards? Consider This Card Instead
If you want rewards you can redeem a number of different ways, it might be smart to get a travel card instead of, or in addition to, your new Costco credit card. Among flexible travel credit cards, the Chase Sapphire Preferred® Card is one of the most popular options.
With this card, you’ll only earn 2x points on travel and dining and 1x points on all other purchases. However, you’ll also earn a huge signup bonus! Plus, you can redeem your rewards in several ways depending on your needs.
As one of their most lucrative options, Chase Ultimate Rewards points transfer at a 1:1 ratio to several popular airline and hotel loyalty programs including Southwest Rapid Rewards, British Airways Executive Club, United MileagePlus Explorer, Marriott, IHG, and Hyatt. If you’re heavily involved in one of these travel programs already, signing up for this card can help you bring your rewards to the next level.
If you’re overwhelmed with all those transfer partners, you can redeem your points for travel directly through the Chase Ultimate Rewards portal for 25% more value. While that may sound daunting, it’s actually rather easy. Booking through the Chase travel portal is a lot like booking travel through Expedia; after you enter your trip details, you’ll be presented with a list of options to choose from.
Lastly, you can redeem your points for cash back or high-value gift cards at a rate of one cent per point. If you’re scared of getting stuck with points you can’t use, this is one option to get excited about. If you get the Chase Sapphire Preferred® Card to earn points for travel but your travel plans fall through for some reason, you can rest assured your points are good for cash back as well. And, who can’t use cash back?
Chase Sapphire Preferred® Card
- Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
- Chase Sapphire Preferred® named a 'Best Travel Credit Card' by MONEY® Magazine, 2016-2017
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
- No foreign transaction fees
- 1:1 point transfer to leading airline and hotel loyalty programs
- Get 25% more value when you redeem for travel through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel.
- No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards
If you want to learn more about the Chase Sapphire Preferred® Card, you can read our full review here.
If you are a Costco enthusiast and spend a ton of money at the store already, you’ll want to look into the new Costco credit card as soon as you can. With 4x points on gas, 3x points on travel and dining, and 2x points on Costco purchases, you can score a ton of easy cash back just by using your card and paying it off every month.
However, the new Costco credit card doesn’t have to be your only credit card. With many other rewards credit cards on the market, you can rack up even more points and miles with some basic planning and a simple strategy.
Best Rewards Credit Cards Directory
If you want to compare the new Costco card’s benefits to other rewards cards, check out our rewards card directory.
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