Why Doesn't Costco Accept Credit Cards and What You Can Use Instead

Costco's cash-only policy can be a bit of a shock to new members, but it's a deliberate choice that sets them apart from other retailers.

They aim to keep prices low by minimizing credit card processing fees, which can add up quickly.

By not accepting credit cards, Costco saves around $1 billion annually in processing fees.

This cost savings is then passed on to members in the form of lower prices on the products they love.

Costco's payment options are limited to Visa and Mastercard online, after discontinuing Discover Network acceptance on its ecommerce platform. They initially accepted only American Express in-store due to a co-brand card product deal, but later shifted to Citibank and Visa.

Costco's decision to limit payment options is likely driven by its desire to encourage membership and sales. As a special case, they can implement policies that wouldn't work for other merchants.

One reason for this might be to discourage excessive use of guest privileges, where multiple people use one account to make purchases. Costco has a policy of taking one payment and receipt per cart or member, and they may want to enforce this more strictly.

Here are some possible reasons why Costco might not accept credit cards:

Costco's business model relies heavily on membership, and they want you to be a member so they can make more money. They have a policy in place to discourage excessive use of guest privileges, which would allow one person to let many people into the warehouse.

Costco doesn't accept credit cards from non-members because it costs them money to process these transactions. Non-members don't pay enough to cover these costs, so they're not a profitable option.

They could easily say "no cards at all" or charge a non-member fee, but instead, they make it difficult for non-members. It's worth noting that Costco offers a non-member fee that exactly equals the annual membership fee, which is a clever way to encourage people to join.

Costco's deal with Visa is a major factor in their decision to only accept Visa cards. By partnering with Visa, Costco gets to reduce or waive the merchant fees for people who use that card, which is a big win for them.

Here are some key points about Costco's payment policies:

Costco has a limited list of accepted credit cards, and it's mainly Visa and Mastercard. You can use a Mastercard credit card to make purchases online at Costco.com, but not in-store.

Costco used to accept Discover Network on its ecommerce platform, but it no longer does. The Discover it card offered a 5% cash back bonus on purchases at Costco and warehouse stores, but that's no longer an option.

In-store, Costco only accepts Visa cards. This means you can't use American Express, Mastercard, or Discover credit cards to make purchases in-store. However, most debit cards are still accepted.

Costco's partnership with Visa likely has something to do with the limited credit card options. As part of the deal, Costco may be getting a reduced or waived merchant fee for Visa cardholders.

Costco only accepts Visa cards in its physical warehouse locations, a change made in 2016 after shifting its co-brand business to Citibank and the Visa network.

Most debit cards are still accepted at Costco warehouses and gas stations, so if you have a Mastercard or American Express debit card, you should be able to use it to make purchases.

In-store, Costco members cannot pay with American Express, Mastercard, or Discover credit cards, but can use Visa credit cards.

Online at Costco.com, Costco members can make purchases with a Mastercard credit card in addition to Visa credit cards.

Costco no longer accepts Discover Network on its ecommerce platform, narrowing acceptable cards to Visa and Mastercard.

Discover captures approximately 3.9% of U.S. Credit volume, but most Discover cardholders likely have a second card, which might not be affected by this change.