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Which is the best card to use on Costco purchases?

Summary

The Costco Anywhere Visa card by Citi offers a high amount of cash back on gas, travel and Costco purchases, but is it the best card to use to earn the most rewards at Costco?

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Costco, after a long partnership with American Express, switched to Citibank in 2016. While the new Costco Anywhere Visa card by Citi offers a high amount of cash back on gas, travel and Costco purchases, is it the best card to use to earn the most rewards at Costco?

That depends on the cards you have – or may sign up for – and how regularly you shop or fuel up at Costco.

With the rollout of the new Citi Costco card, the warehouse club opened the doors to all Visa cardholders. That means there are several credit cards that may offer more rewards at Costco in certain circumstances.

Read on to see why:

The Costco Anywhere Visa is a great card … with one major drawback

The Costco Anywhere Visa card isn’t just a great card for Costco purchases; it’s an all-around great card to use as your go-to for every purchase to earn a high rewards rate and has no foreign transaction fee.

The card offers 4 percent cash back on up to $7,000 in gas purchases per year (1 percent thereafter) – from any eligible gas station, not just Costco – 3 percent cash back on restaurants and eligible travel purchases, 2 percent cash back on Costco purchases and 1 percent cash back on other purchases.

Costco Anywhere Visa® Card by Citi

Our rating: 2.5 out of 5
Score required: Excellent
Type of card: Cash back
Spending categories: Gas, restaurants, travel, Costco purchases

Read full review

  • 4% cash back on eligible gas purchases (on up to $7,000 in purchases per year, 1% thereafter)
  • 3% cash back on restaurant and eligible travel purchases
  • 2% cash back on Costco purchases
  • 1% cash back on other purchases
  • $0 annual fee

Our take: The Costco Anywhere Visa excels as a card for Costco and gas purchases, though you’ll have to contend with an annual membership fee for Costco and only redeeming your cash back once a year.

The bonuses on gas and restaurant purchases are generous, pushing the potential earning rate to nearly 2 percent of your spending. If you spend heavily in a particular category (e.g., restaurants) – you could push your cash back earnings higher than 2 percent.

There is one major drawback to the Citi Costco Visa, however: You receive your cash back once a year. Cash back rewards are mailed as a certificate in February, which you must take to your local Costco to redeem for purchases or for cash back at the register. If your Costco membership expires before the certificate is sent, you forfeit all earnings for that year.

Avid Costco shoppers may view this as a moot point. But, if you are on the fence about your Costco membership, or if you would prefer to get your hands on your cash back sooner, you may want to consider a rewards card that is less restrictive at redemption.

You can’t beat the Costco card for Costco gas purchases

If you’re trying to decide which rewards card to wield at the pump, the Costco Visa is usually the best option. Getting 4 percent cash back on Costco’s already discounted gasoline is a good deal. While there are a few other cards that offer a 5 percent cash back rate on gas purchases, their rewards terms generally exclude Costco and other warehouse stores.

One exception is the Chase Freedom®, which offers 5 percent cash back on quarterly rotating categories. Though the spending categories can vary by year, the first- quarter category is usually gas purchases, and it does include gas from Costco. So, for one quarter of the year, the Chase Freedom card is the better option for gas purchases – not only do you earn a higher rewards rate, but you can transfer your rewards to other Chase Ultimate Rewards cards to get an even better value on travel redemptions.

For the highest earning rate in the first year: Chase Freedom Unlimited

The Chase Freedom Unlimited card may not seem like the best bet for Costco purchases – after all, its 1.5 percent cash back rate is lower than the 2 percent rate that you can earn with the Costco card – but the Chase Freedom Unlimited may offer a better rewards value.

Chase Freedom Unlimited®

Our rating: 3.8 out of 5
Score required: Excellent
Type of card: Cash back
Spending categories: Same rate on every purchase

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  • 1.5% cash back on every purchase
  • 1.5% additional cash back on every purchase in your first year (up to $20,000 in purchases)
  • $0 annual fee

Our take: You can earn 3% cash back on your Costco purchases with the Chase Freedom Unlimited card in the first year (with a $20,000 purchase limit). After that, the rate drops to 1.5% cash back, which is still great, considering the rewards are so flexible.

Here’s why: The rewards points that you earn on the Chase Freedom Unlimited card can be transferred to some other Chase cards, including the Chase Sapphire Preferred and Reserve cards – where you can redeem them for travel rewards or transfer them to one of Chase’s airline partners to get an even better value on your points.

The tables below show the value of the different redemption options for each card. As you can see from the first table, your earnings from the Costco card for $2,500 spent at Costco amount to $50 – no more, no less:

Rewards on $2,500 Costco spend: Costco card

Average rewards rateEstimated points/yearFinal rewards value
2%5,000$50

With the Chase Freedom Unlimited card, the value of your points varies drastically, depending on how you redeem them. If you opt for cash back (i.e., a statement credit), you only get $38 worth of value, which pales in comparison to the Costco card. However, if you transfer your points to the Chase Sapphire Preferred or Reserve card, you can boost the value of your points by redeeming them for travel through the Chase Ultimate Rewards portal, where you get a 25 percent (Preferred) to 50 percent (Reserve) redemption bonus.

And, if you transfer the points to an airline partner, you can do even better by carefully searching for airfare options with higher values. For instance, Southwest points are very valuable – we value them at 1.6 cents per point on average. The Chase Freedom Unlimited rewards earned on your Costco spending could be worth $59or more when transferred to Southwest’s loyalty program.

Rewards on $2,500 Costco spend: Chase Freedom Unlimited card

Average rewards rateEstimated points/yearSample redemptions: Estimated value
1.5%3,750
  • Statement credit – $38
  • Chase Preferred travel redemption – $47
  • Chase Reserve travel redemption – $56
  • United Airlines transfer – $57
  • Southwest Airlines transfer – $59

For 2X rewards with more flexible redemption: Capital One Venture card

If you are racking up rewards on your Capital One Venture card, this one’s a no-brainer: The Capital One Venture card is the way to go. The card offers a 2 percent rewards rate on all your spending, including Costco purchases. Like the Citi Costco card, points on the Capital One Venture card are valued at exactly 1 cent, which means $2,500 in spending will net you $50 in rewards.

Capital One® Venture® Rewards Credit Card

Our rating: 4.2 out of 5
Score required: Good to excellent
Type of card: Travel
Spending categories: Hotels, general purchases

Read full review

  • 50,000 miles if you spend $3,000 within 3 months of approval
  • 10 miles per dollar on hotel rooms booked and paid through hotels.com/venture
  • 2 miles per dollar on other purchases
  • $95, $0 in first year

Our take: The Capital One Venture card matches the Costco Visa card’s 2X earning rate on Costco purchases, and its rewards are much more flexible and simple to redeem than the Costco card’s.

However, unlike the Citi Costco card, the Venture card is extremely flexible in how you redeem your rewards. You can redeem any amount at any time, and you have a variety of redemption options, including cash back, merchandise and travel.

One drawback, however: The card includes a $95 annual fee (waived in the first year).

Several other cards offer 2 percent cash back on Costco purchases

Besides the Capital One Venture card, there are a few other cards that offer a 2 percent cash back rate on Costco purchases.

The Fidelity Visa Signature, PenFed Power Cash Rewards Visa Signature and Capital One Spark Cash for Business cards, for example, all offer a flat 2 percent rewards rate on your purchases. The 2 percent rate on these cards come with some stipulations: The Fidelity and PenFed cards require you to have a qualified bank account. The Capital One Spark card includes a $95 annual fee – which is waived the first year – and requires you to be a business owner.

Still, for current cardholders, these cards are the better option for Costco purchases, since you can redeem your rewards at any time.

Cards that earn 2 percent cash back on Costco purchases

 Credit cardRewards rateRestrictions
Fidelity Visa Signature2% cash back on every purchaseMust have Fidelity bank account
PenFed Power Cash Rewards Visa Signature2% cash back on every purchaseMust be PenFed member with qualified bank account
Capital One Spark Cash for Business2% cash back on every purchaseMust be business owner to qualify for card


See related:
Which is the best card to use on Amazon.com purchases?, Chase Sapphire Preferred versus Chase Sapphire Reserve: Which is better for you?

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we do receive compensation when you click on links to products from our partners. Learn more about our advertising policy

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