The growing popularity of warehouse stores is based on the theory that bigger is better. The biggest of the so-called "big box" retailers can sell at lower prices by having fewer locations that are larger than most grocery or discount stores. Inside, shoppers find a more limited selection of products, which are sold in larger unit items. In fact, warehouse stores, sometimes called wholesale clubs, can even extend the philosophy of limited selection to its arrangement with credit card payment networks. By entering into exclusive agreements with credit card payment networks, these stores can attempt to minimize their transaction costs.
The Big Costco Shakeup Finally Occurs
For many years, Costco had an agreement with American Express to be its exclusive credit and charge card partner. Shoppers could use debit cards from other payment networks, but it would only accept credit or charge cards that were part of the American Express network. In addition, American Express and Costco offered a co-branded credit card that had no annual fee for Costco members.
But in 2015, Costco announced that it was severing its relationship with American Express and partnering with Visa to be the sole credit card payment network accepted at its stores. In addition, Citi is offering a new co-branded credit card called Costco Anywhere. And after several months of anticipation, the changeover from American Express to Visa finally occurred at Costco stores this June.
Other Card Issuers Try to Seize this Opportunity
For devoted Costco customers, and loyal shoppers at other warehouse stores like Sam's Club and BJ's, shopping actively at their favorite big box store can add up to a large percentage of their monthly credit card charges. Therefore, card issuers are doing their best to heavily market their products to warehouse store shoppers. Furthermore, Costco's migration from American Express to Visa has opened the door to numerous card issuers that didn't offer cards that were part of the American Express payment network.
For example, Bank of America recently changed the terms for its BankAmericard Cash Rewards™ Credit Card to include wholesale clubs alongside grocery stores in offering 2% cash back on grocery store/wholesale club purchases and 3% back on gas purchases, for the first $2,500 in combined grocery store/wholesale club/gas purchases per quarter (after which those categories will earn 1% cash back. In addition, Chase updated the quarterly bonus categories for its Freedom Visa card to include wholesale clubs to be eligible for a 5% cash back though the end of 2016 (on cardholder's first $1,500 of qualifying spending each quarter).
Which Card Should You Use at Wholesale Clubs?
Now that Costco is accepting Visa cards, members of this wholesale club are faced with much the same choices as members of BJ's, Sam's Club and other warehouse stores. As with any other purchase, it only makes sense to use a rewards card when you are able to avoid interest charges by paying off each month's statement balance in full, as rewards credit cards have higher standard interest rates than other non-rewards cards. But if you are using a rewards credit card, it's best to compare the cards co-branded with the warehouse club with other cards, and determine which cards will offer the most cash back for the spending you will do. Finally, you will also want to consider the cards annual fee and other fees, as well as its cardholder benefits.
Americans love warehouse stores for their low prices and efficient shopping experience, and by choosing the best rewards credit card for your needs, you can further decrease the price of your next shopping trip.
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