As of yesterday, Costco made the big switch from American Express to Citi. Many people shop at Costco religiously, and the retailer has long kept costs down through exclusive credit card contracts.
Previously Costco only accepted American Express credit cards, while now you can use any Visa card for your US Costco purchases (a Mastercard issued by Citi, on the other hand, wouldn’t be eligible at Costco).
With that in mind, Costco’s new co-branded credit cards have new benefits. Specifically, I’m talking about the Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi, both of which have no annual fees in conjunction with a Costco membership.
These personal and business cash back cards offer the following return on spend:
- 4% cash back on eligible gas worldwide including at Costco for the first $7,000 per year (then 1% thereafter)
- 3% cash back on restaurant and eligible travel purchases worldwide
- 2% cash back on all other purchases from Costco and costco.com
- 1% cash back on all other purchases
This is a nice improvement over the former Costco American Express. How do I feel about the return the cards offer on various spending categories?
- The 4% cash back on gas purchases is fantastic, especially since you wouldn’t usually earn bonus points for gas purchases at Costco (since those purchases are coded differently than other gas retailers)
- The 3% cash back on restaurants and travel purchases is a solid return as well, though there are other great cards for dining and travel purchases
- The 2% cash back at Costco is solid, so you won’t consistently do significantly better with another card
- The 1% cash back offered on other purchases isn’t really competitive nowadays, given that there are cards which offer up to 2% (or more) cash back
What other Visa cards should you consider for Costco purchases?
Use the Chase Freedom® for up to 5x points
The Chase Freedom offers 5x points in rotating quarterly categories, valid for up to $1,500 of spend per quarter.
However, for the rest of 2016, the Chase Freedom has added wholesale clubs as one of the eligible categories where you can earn 5x points. That means that you can still earn 5x points on up to $1,500 of spend at Costco in the third quarter, and on up to $1,500 of spend at Costco in the fourth quarter.
The 5x points can be converted into 5% cash back, or in conjunction with the Chase Sapphire Preferred® Card or Ink Business Preferred® Credit Card, you can convert those points into “premium” Ultimate Rewards points. These can be transferred to Chase’s airline or hotel partners, including World of Hyatt, Singapore KrisFlyer, United MileagePlus, etc.
Personally I value premium Ultimate Rewards points at 1.7 cents each, so to me those 5x points are worth ~8.5%.
Use the Chase Freedom Unlimited® for 1.5x points
Instead it offers 1.5x points on every dollar you spend, regardless of the category.
As is the case with the Chase Freedom, those points can be redeemed as cash back, meaning you’re earning 1.5% cash back.
However, in conjunction with the Chase Sapphire Preferred® Card or Ink Business Preferred® Credit Card, you can convert those points into “premium” Ultimate Rewards points. Those can be transferred to Chase’s airline or hotel partners, including World of Hyatt, Singapore KrisFlyer, United MileagePlus, etc. I value those points at 1.7 cents each, so to me earning 1.5x points per dollar spent is the equivalent of earning a return of ~2.55%.
The Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi are compelling for spend at Costco, especially long term. The cards can even be worthwhile for spend at gas stations and on restaurants and travel, given that you earn 3-4% cash back. That’s great for a no annual fee card. However, I wouldn’t use these cards for spend in other categories, where you’re getting a return of just 1%. There are other cards which offer a much better return on everyday spend.
Even at Costco, there are certainly other cards to consider using, like the Chase Freedom and Chase Freedom Unlimited (that’s ironic, because the cards are issued by Chase). Which card is best for you depends on your spending patterns.
Which card do you plan on using for your Costco purchases?