The Reason Costco Only Accepts Visa Credit Cards

Costco customers don’t have many complaints. For a $65 annual fee, they can enjoy considerable savings on a variety of bulk food and household items. (And even caskets, if they’re so inclined.) But, there is one nagging frustration some visitors have: If you’re paying via a credit card, Costco only accepts Visa. That means Mastercard, American Express, and Discover users are out of luck. So what’s the reason?

Like most of Costco’s business decisions, it comes down to cutting expenses. Typically, merchants are charged a transaction fee of up to 3 percent by credit card issuers. While that may not sound like much when picking up a rotisserie chicken, it can ultimately add up to millions.

Costco’s workaround is having an exclusive deal with Visa. In exchange for making Visa the only credit card accepted at the warehouse and at gas pumps, Visa fees amount to virtually zero.

This wasn’t always the case. Before the deal with Visa was struck in 2015, Costco had a similar arrangement with American Express that lasted for 16 years. If consumers wanted to use a credit card, it had to be an AmEx. This was vastly more inconvenient, as AmEx has a relatively smaller cardholder pool (140 million worldwide) compared to Visa’s giant network (4.3 billion).

But when Costco and AmEx failed to reach a new deal—one that Costco presumably wanted to improve after paying AmEx a reported 0.6 percent in transaction fees, costing up to $180 million a year—Visa and Citigroup swooped in, making Visa the exclusive card and Citi the store’s co-branded card issuer.

“The numbers didn’t add up,” AmEx chief executive Kenneth Chenault said at the time. “We couldn’t accept their financial terms nor their contract terms, some of which would have meant taking on more risk than we were comfortable with.”

While Visa is the only credit card accepted by Costco, it’s not the only form of payment patrons can use. Members are free to use almost any debit card, even if it’s issued by Mastercard. They can also pay by cash, check, electronic benefit transfer (EBT), mobile payments like Apple Pay, or traveler’s checks.

Despite the Visa partnership, there are ways members can use a Mastercard credit card to shop at Costco: The company accepts them for online orders on their website. They also offer a Costco-branded Mastercard—but only for shoppers in Canada.

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