Costco Credit Card Review
We’re going to specifically talk about the Costco card, which we consider to be a niche card. It’s most useful when used for its stated purpose, which is making purchases at Costco, where you can essentially get four percent cash back.
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Now, let’s discuss the Costco card. They label it as a four percent cash back card, and it comprises two components: the membership and the cash back earned at Costco. Costco offers two membership levels, and we’ll talk about the cost shortly. The first component, the membership, provides two percent cash back on your purchases at Costco. The Costco credit card adds an additional two percent cash back. This combination totals four percent cash back.
The two percent cash back from the membership has an annual limit of $50,000. In other words, you can earn up to $1,000 cash back per year. This is a reasonable limit, as it translates to spending around $4,000 per month, assuming you’re using this card for household expenses, not business purposes.
The two percent cash back from the credit card has no spending limit, so you can continue earning that cash back regardless of your spending.
However, if you exceed the $50,000 annual spending limit for the membership, you’ll still earn the two percent cash back from the credit card for any additional spending.
To maximize your cash back, you must use the Costco credit card when making purchases at Costco. Only then will you receive the full four percent cash back. Additionally, it’s essential to pay off your credit card balance each month to avoid interest charges.
Here are two important points to note:
- The $1,000 cash back from the membership is distributed annually, not monthly. You’ll receive this cash back after the February billing cycle for the previous year’s spending.
- While there is no annual fee for the credit card, you should consider the $120 annual membership fee for Costco. So, even if you receive the maximum $1,000 cash back, you should deduct the $120 membership fee, leaving you with a net gain of $880.
Aside from the four percent cash back at Costco, the Costco card also offers other benefits, such as three percent cash back on travel and dining with some specific terms and conditions. There’s also cash back on gas purchases up to the first $6,000 spent during the year, after which it reverts to one percent cash back. For all other non-Costco spending, you’ll receive one percent cash back, making it a basic catch-all card.
In summary, the Costco card is considered a niche card and is most valuable when used for Costco purchases, where you can get up to four percent cash back. It might not be the best choice for spending outside of Costco, as other cards offer better cash back rates. We also have a video comparing the Sam’s Club card, which you should consider watching. Additionally, we have a video that compares the two warehouse club cards and does the math to help you decide which one is more suitable for your needs, whether it’s for your family or business.
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