Using your credit card to purchase goods in stores may be a convenience to you, but it also comes at a price you might not be aware of. In order to accommodate customer’s preferred payment methods, retailers must pay merchant credit card processing fees of anywhere from 1.5% to 3.5% on every transaction in store. According to Nerdwallet, American Express charges the highest percentage and Visa charges the lowest.
That might not sound like a lot of money, but when you do the math and see that it’s taking between $1.50 to $3.50 on every $100, you see how it adds up. Additionally, most businesses pass part or all of that fee on to their customers, so in the long run you pay more money just by using your credit card.
Costco Strikes a Deal
Warehouse retailer Costco, which aims to offer the lowest prices to its members in all ways possible, has come up with a workaround on the payment processing fee that is designed to save customers money. According to the company website, Costco only accepts Visa credit cards at its warehouse locations and gas stations.
But wait, you might be wondering — that’s still a credit card, so surely it still comes with a processing fee? It does, but at a huge discount.
Visa Made Costco an Offer It Couldn’t Refuse
Visa charges the lowest processing fee of most well known credit cards, such as MasterCard, Discover and American Express. The credit card company knows a good deal when it sees one, too. For the exclusivity of Costco only taking its credit cards, Visa is giving Costco a significant discount on its processing fees to less than 0.4% — an unbelievably low rate.
It’s a win-win, though. Costco gets to keep offering its customers the lowest prices because it doesn’t have to increase them to accommodate these fees. Visa wins by not losing Costco business to competitor credit cards. And you, the customer, benefits the most.
It’s Not the First Exclusive
If an exclusive partnership with a credit card seems unheard of, Costco has actually been doing this from the beginning. Early on, it teamed up with Discover credit cards exclusively, a card that not as many people were likely to have, then switched over to American Express from 1999 to 2017. However, like any business, Costco looks for the best deal. When American Express stopped offering the best possible rate, Visa won out — along with the Visa and Costco customers.
Costco Has Its Own Visa
If you don’t have a Visa card, but still want to shop at Costco, never fear — Costco has its own Visa card (by Citibank) that you can sign up for with no added fees beyond Costco’s annual membership. You don’t have to purchase the Costco Visa, but if you don’t already have one, this makes it easy. The Costco Visa also offers additional perks, such as:
- 4% cash back on gas and EV charging stations up to $7,000 per year and 1% thereafter
- 3% cash back on restaurants and eligible travel
- 2% cash back on purchases from Costco and Costco.com
- 1% cash back on all other purchases
- No foreign transaction fees
What using a Visa means for the customer is that not only do you get the great deals that Costco is known for, you also get the special perks that come with a unique Visa card. And feel free to shop around.
Shop for the Best Visa Card With Rewards
If Costco is your go-to, and you have to use a Visa, then you might want to start shopping for a Visa card that has the best perks and rewards.
Two that are considered the best are the Wells Fargo Active Cash Visa — which allows users to earn a $200 cash rewards bonus if they spend $500 in the first three months and unlimited 2% cash back on purchases — and the Chase Freedom Unlimited Card, where you can earn 1.5% cash back on everything you buy and 5% cash back on travel.
Costco Has the Brand Loyalty To Accept Only One Card
A lot of retailers don’t have the customer loyalty and massive customer base that Costco does. Costco has 858 warehouses, 590 of those in the U.S. and Puerto Rico, and in 13 other countries as well. This translates to more than 124 million customers who shop at Costco and who are likely to pick up whatever card Costco requires.
So, if credit is your preferred way to pay, rest assured that Costco and Visa have you covered — and at a rate that will save you money, too.
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