New Costco Credit Cards Offer Up to 4% Cash Back

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Today Costco switched over from only accepting American Express cards to only accepting Visa cards. Its new co-branded cards are the Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi, which offer 4% back on gas, 3% back on travel and restaurants, and 2% back at Costco with no annual fee.

I’ll take a look at the cards and compare how their category bonuses stack up against other cards’.

Quick Facts

• Sign Up Bonus: None
• Category Bonuses: 4% back on gas (including at Costco) up to $7,000 spent per year, 3% back on travel and restaurants, and 2% back at Costco or costco.com
• Global Acceptance: Chip technology and 3% foreign transaction fees
• Annual Fee: no annual fee

Sign Up Bonus

The Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi have no sign up bonus. That’s standard for cash back cards with no annual fees. (And that’s one reason why the 17,500 point or $175 sign up bonuses on the Chase Freedom and Freedom Unlimited are so good.)

Category Bonuses

Both cards offer:

• 4% back on gas (including at Costco) up to $7,000 spent per year
• 3% back on travel and restaurants
• 2% back at Costco or costco.com

All other spending earns 1% back.

Gas: 4%

The Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi offer the best cash back percentage at all gas stations for a cash back card that anyone can get. (The PenFed Ultimate Cash Rewards Plus offers 5% back at gas stations, but you have to have another PenFed account to qualify.)

The Ink Plus Business Card offers 2x Ultimate Rewards per dollar at gas stations up to $50,000 per year. I value Ultimate Rewards at 2 cents each, so that is comparable to 4% cash back from the CostCo cards and better if you spend more than $583 per month on gas ($7,000 per year, the cap on the Costco cards’ gas category.)

The Freedom offers 1x Ultimate Rewards per dollar at gas stations normally, but gas stations were the 5x category from January through March this year, up to $1,500 spent that quarter.

Travel and Restaurants: 3%

The Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi offer 3% cash back “on restaurant (including cafes, bars, lounges and fast food restaurants) and eligible travel purchases worldwide, including airfare, hotels, car rentals, travel agencies, cruise lines and Costco Travel.”

For dining, the Citi Prestige® Card and Chase Sapphire Preferred offer 2x points per dollar, which I value at 3.8% and 4% back respectively.

The Sapphire Preferred offers 2x on travel also, including all the travel expenses bonused by the Costco cards and several others. Even better, the Citi Prestige® Card offers 3x points on airfare and hotels.

Costco: 2%

The Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi offer 2% cash back  at Costco and on costco.com.

The Blue Cash Preferred Card from American Express offers 6% back at grocery stores. Warehouse clubs, like Costco, do not earn the 6% back, and Costco doesn’t accept Amex anyways.

The Chase Freedom is a Visa that offers 5 Ultimate Rewards per dollar up to $1,500 per quarter at warehouse clubs for the last three quarters of 2016. You can cash that in for 5% back or for 5 United/Korean/British Airways/Southwest/Virgin Atlantic miles per dollar if you know the Freedom Two Step.

Other: 1%

Don’t use these cards for 1% cash back. Almost any card offers a better return.

Foreign Transaction Fees

Don’t use these cards abroad. They have a 3% foreign transaction fee. Use your Sapphire Preferred or Ink Plus abroad, both of which have no foreign transaction fee.

No Annual Fee

The Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi have no annual fee.

Costco Cash Back Annually

Unfortunately the mechanism for receiving the cash back on these cards is not as straightforward as with other cards (my summary below):

Redeeming Costco Cash Rewards: Your reward is distributed annually via U.S. Mail in the form of a reward coupon included in your February billing statement, and is redeemable through December 31 of the year issued in a single transaction at any U.S. Costco warehouse, including in Puerto Rico, for merchandise or cash back. The reward coupon will contain your Costco Cash Rewards balance based on your eligible purchases during the annual reward period. The annual reward period is based on January through December billing statements. Should you choose to redeem only a portion of the coupon for merchandise, you will receive the remaining balance in cash at the Costco warehouse register upon checkout. Some warehouses may not permit the reward coupon to be redeemed for alcohol purchases. Requests for cash may be fulfilled in the form of a check at Costco’s discretion. If you are enrolled in Paperless Statements, a paper billing statement will be provided to you in February if you earned a reward coupon during the previous annual reward period. Coupon must be redeemed in person on or prior to its expiration date of December 31 in the year in which it is issued. Any Costco Cash Rewards you have earned on purchases made by authorized users on your Card Account will be added to your Costco Cash Rewards Total. Only you, the primary cardmember, are eligible to receive the annual reward coupon, however, you or any authorized user on your Card Account may redeem your coupon. You may not transfer it to anyone else. You will not receive a reward coupon if your reward is less than $1 or your account is closed at the time it is scheduled to be sent; any Costco Cash Rewards that had been accrued at that time will be forfeited. You must maintain your Costco Membership to receive and redeem the reward coupon.

Basically:

• Every February, you get all of the cash back from the previous January to December statements in the form of Costco Cash
• You have to go to a Costco to use the Costco Cash for purchases (why would you do that?) or cash it out (smarter since that means you can use your Costco credit card for purchases and get another 2% back.)
• Your Costco credit card must be open in February or you forfeit the last year’s earning.

This is an annoying procedure. The better cards give you cash back monthly, redeemable automatically or at least online. This procedure means you are offering Costco an interest-free loan of your cash back, which you forfeit if you cancel your credit card. And to redeem, you have to go to a Costco store.

Those burdens are not too cumbersome, but they are frustrating.

Business vs. Personal

There’s not much reason to get the personal card over the business card or vice versa.

One reason to get the business card is that Citi may no report it on your personal credit report, so Chase may not see it, so you may be able to get around the Chase 5/24 rule.

If You Have the American Express Costco Credit Card

You should have already received a Citi card as a replacement. If not, contact Citi.

Bottom Line

The Costco Anywhere Visa® Card by Citi and Costco Anywhere Visa® Business Card by Citi offer 4% back on gas, 3% back on travel and restaurants, and 2% back at Costco with no annual fee.

I wouldn’t get either as my only credit card, but they are very valuable for 4% back on gas purchases (up to $7,000 per year) and 2% back at Costco if you have used up your quarterly 5x on the Freedom.