You Might Be Surprised To See Me Recommend A Credit Card That Doesn’t Earn Miles Or Points
Many of you have asked me for credit card recommendations over the years. I have a core group of credit cards that I carry in my wallet. I have plenty of others that serve a purpose, but here are the ones that live in my wallet on a daily basis:
- Starwood Preferred Guest American Express (2 of these, probably my favorite card).
- Chase Ink Business Credit Cards (3 of these in rotation).
- Hyatt Visa
Those are the cards that work for me, though they certainly might not be best for you. But, there’s one other card in my wallet that you really should consider. Even if you’re not a Costco fan, it’s time to think about the Costco Visa as an every day credit card.
I happen to be a huge Costco nut, which is the reason I applied for the card after the new version of the Costco Visa was released back in early 2016. Still, I never really thought of the Costco credit card as an “every day” card. A recent change is starting to make me think it is. First, a quick summary of bonus categories for the Costco Anywhere Visa:
- 4% cash back on all gasoline purchases (capped at $7,000 per year).
- 3% back on restaurants and travel.
- 2% back on Costco.
- 1% back on everything else.
Recent Changes
I carried my Costco Visa card overseas on some trips in 2017 and made the mistake of charging a few random transactions to it. When I returned to the US, I discovered I had been charged a 3% foreign transaction fee. Ugh! I knew better than that, but I had forgotten.
One Mile at a Time reported recently that Citibank has eliminated the foreign transaction fee.
But, What About The Miles?????
I’m still a big fan of credit cards that earn miles or hotel points. Plus, I really like flexible currency cards like the Chase credit cards that earn Ultimate Rewards points. But, not everyone travels like me.
For a “go-to” credit card in your wallet, the Costco Visa checks a lot of boxes. 4% cash back on gas is great. 3% on restaurants and travel is pretty strong as well. Could you do better elsewhere if you cherry pick? Sure. But, this is one card that you can consistently pull out of your wallet without thinking and do okay.
For some folks, it’s hard to remember which card to pick from when they carry a handful. I’m a bit more anal retentive than that, but I get it. That’s the primary reason I think the Costco card is a good card to hold. No annual fee also makes it an easy card to hold onto, even if you sign up for a new card to earn a bonus or save up for a special trip.
What Are The Downsides?
There are a couple of restrictions to consider. While you can get actual cash back, you’ll need to do so at a Costco location. There are a lot more Costco warehouses than there used to be, but they’re not everywhere. Plus, Costco only issues the rebate checks once per year. If you want access to your cash back every month, there are a bunch of 2% cash back cards from folks like Fidelity or the Citi Double Cash card. Lastly, I do think there’s a functional limit on the rebate you can earn from Costco on a yearly basis, though I couldn’t hunt it down in the T&C. That might have only applied to the Executive Memberships.
The Final Two Pennies
No two strategies to earn the most miles or points are going to be identical. I always preach to folks that they should figure out their goals before heading down the path of applying for a credit card. I also think it makes sense to empty your wallet at least once a year and figure out which cards you actually want to keep.
Lastly (and probably most important), you probably shouldn’t be playing the rewards card game if you can’t pay off your balance every month. Cash back cards are sort of the exception here, especially ones without annual fees. At least the cash back can help burn down your balance on an annual basis. But, the best strategy is to carry no balance at all.
Side note: I don’t earn any commissions on credit card sign-ups. It just occurred to me that I use my Costco Visa a lot. With the elimination of foreign transaction fees it’s really rounding out to be a card you should think about.
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I’m a Costco fan, but I don’t see the card as compelling.
The premise of your article is what should somebody that doesn’t want to optimize their earning by selecting a different card for each credit/debit card transaction, so they only want to select one card to keep in front of their wallet to use every day.
Comparing against a generic 2% cashback everywhere card, for simplicity, let’s back out Costco purchases, for which the Costco earns the same 2% as the generic 2% cashback everywhere card.
Then if you have little or no gasoline purchases, you’d have to spend more than 50% on restaurant & travel (leaving less than 50% on everything else) to come out ahead with the Costco card. Or if you do spend a decent amount on gasoline, say 10% of your total expenditures that can go onto credit cards, you’d still have to spend more than 35% on restaurants & travel (leaving less than 55% for unbonused category) to come out ahead with the Costco card versus that generic 2% cashback card.
Let’s make those numbers real. I would think spending $1,000 through credit/debit card transactions is reasonable for an upper-middle income household. (This excludes the typically large spending categories for which households typically don’t go through a credit/debit card such as rent, mortgage, loan payments, etc.) So either that household is spending more than $500 a week out of the $1000 on restaurants & travel, or that household is spending $100 per week on gasoline *AND* more than $350 on restaurant & travel (leaving less than $550 on unbonused category spending). Or else that household would do better just putting all of their credit/debit card transactions onto the generic 2% cashback card.
Or phrased differently, the 1% difference on unbonused category spending represents a rather strong headwind against which the tailwind from the bonused categories have to try to push against.
My example of $1000 in spending was meant to be imagining a household that spends $1000 PER WEEK using credit/debit card transactions.
PH, always love your perspective. I’d agree that I wouldn’t put everything on the Costco card (I don’t currently). I’d recommend a 2% cash back card like Citi Double Cash or Fidelity for the “regular purchases”. I just think that the Costco card offers a nice bonus for Costco, restaurants, travel and gas. Citi Double Cash is MC so can’t be used at Costco. Pretty sure Fidelity is a Visa and has no annual fee, so that would earn the same at Costco. At any rate, good points by you. I still like the Costco card for folks who may not necessarily be looking to travel with their rewards.
Just to confirm your suspicions – no limit on the Costco Visa cash back rewards (outside of $7k fuel purchases). Executive membership does have a $1k reward limit (~$50k in eligible Costco spend).
I personally think it’s a great card if you drive a lot, especially for work. One important point to note is that the 4% fuel reward specifically excludes a lot of “competitor-affiliated” stations. From the T&C:
Certain Non–Qualifying Purchases. You will only earn 1% cash back, not 4%, for gas purchased at superstores, supermarkets, convenience stores and warehouse clubs other than Costco or for fuel used for non–automobile purposes.
Gino, that’s good to know. I recall the Exec card being capped at $1,000.