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Why Does Costco Only Accept One Type of Credit Card?

Motley Fool - Mon Feb 6, 4:52PM CST

A man pushing a shopping cart through the aisles of a warehouse store.

Image source: Getty Images

Costco is known for low prices, massive warehouses, and having arguably the most restrictive credit card policy of any major retailer. While Costco stores and gas stations accept most debit cards, they only accept Visa credit cards.

Most other retailers accept credit cards from all the major payment networks, which include American Express, Discover, Mastercard, and Visa. What makes Costco different? Here's the answer.

Why does Costco only accept one type of credit card?

Costco's credit card policy is all about saving money. It negotiates a partnership agreement with a single payment network in exchange for much lower processing fees. As part of its current deal with Visa, it pays transaction fees of only 0.4%. By saving on fees, Costco is able to keep prices low.

For a store to accept credit card payments, it needs to pay a fee to the payment network on every transaction. Credit card processing fees normally range from about 1.3% to more than 3%, depending on the store and type of credit card used. For most stores, these fees are simply the cost of doing business. They need to accept all types of credit cards because if not, they could lose customers.

Costco doesn't have that problem. It has a loyal customer base, with nearly 121 million members as of November 2022. That gives it a couple of key advantages in negotiating payment processing fees:

  • It doesn't need to accept every payment network to be successful. It can choose to work with just one, and has done so for decades.
  • Its huge customer base gives payment networks a reason to play ball. The payment network that partners with Costco guarantees that only its cards are accepted there.

Costco previously partnered with Discover, followed by a 16-year partnership with American Express. Under its deal with American Express, Costco paid a transaction fee of 0.6%. Costco and American Express split when Visa agreed to take 0.4%.

What to do if you're a Costco member

If you like to shop at Costco, then you should have at least one Visa credit card. You could also pay with cash or a debit card, but credit cards are the better payment option. They offer much more generous rewards programs that allow you to earn cash back or travel points. Many also have valuable complimentary protections, such as purchase protection and extended warranty coverage. These aren't as common with debit cards, and you don't get anything like this when paying in cash.

Fortunately, Visa is the largest payment network by market share, so there are plenty of great card options to choose from. If you're not sure where to start, check out the best Visa credit cards. Or, you could focus on Visa cards that offer a specific benefit you want, such as:

For those who shop at Costco often, a Costco credit card could make the most sense. Costco members can apply for the Costco Anywhere Visa® Card by Citi.

Keep in mind that you can use Mastercard and Discover credit cards on If you have one of those cards that you like using, you could at least use it to pay for your online Costco purchases.

Costco's rules on credit cards can be a bit frustrating for shoppers who'd rather pay with a different type of card. But this is also one of the ways Costco offers low prices, so it's a net positive. Just make sure you have a Visa credit card, and you'll be good to go.

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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Mastercard, and Visa. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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