I Figured Out A Way To Use ANY Credit Card At Costco (As They Only Accept AMEX Now)!

| May 06, 2008 | 51 comments

One of my biggest pet peeves about Costco is how they stick to the American Express credit card only. I am a big fan of using my credit card and saving the Alaska Air Skymiles. I don’t own an American Express card and always have to resort to losing AT LEAST 200 Alaska Air Skymiles (I don’t remember the last time I made it out for under $200). But I believe I have figured out the answer that will solve ALL our dreams. Well, all that involve being able to get Skymiles while not AMEX’ing it…

Yes, I can’t stand not getting the best bang for my buck, so it pains me every time I walk into Costco to know that I’m going to walk out with at least $200 of groceries (my record is $645, ugh) and have nothing to show for it aside from a debit transaction on my bank statement.

I don’t charge ANYTHING to that debit card but Costco and my mortgage (if you know how to add your mortgage to a credit card, please let me know as I’d do that too if I could).

I always leave the conglomerate with a sense that I wasn’t getting as good of a deal from them as I had in the past. Part of me believes that they’ve suckered people in to thinking that bigger means better value ALL the time.

It DID back when Costco first started, and you could get a good deal on anything there, but anymore, you get just as good of a deal at Safeway or Fred Meyer for groceries as you do from Costco, you just get MORE of them there, but I digress.

So last week my wife was being a good samaritan and helped out a friend that was going through some hard times by providing some groceries and necessities to her family in the form of a Costco gift card. You can get them for no “sales” fees, no “hidden” costs, no “transaction” fees. It actually means that when you buy a $300 gift card, you get charged $300 (click to enlarge).costco.JPG

This is different from the AMEX gift card where you pay like $10 in fees to get the card started. I thought of this idea to get around the “no Skymiles clause” at one point too, but couldn’t come to terms with tacking on 10% more to use it. Guess it is the “frugal” in me that stopped it.

Go HERE to buy a Costco gift card and you can purchase it with your MasterCard of Visa instead of giving in to their demands of AMEX only!

So anyway, I gave my wife a big kudos for being a good samaritan first off, but secondly for finding this little gem to work the system at Costco to finally give us what we’ve always wanted, Costco Skymiling ability!

photos by: greenwithenvy, syldavia

Filed Under: advice • Credit Cards • financial education • Frugal • Uncategorized

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  • http://mrsmicah.com Mrs. Micah

    Awesome! That’s very practical for someone who shops exclusively at CostCo. I normally don’t like gift cards, but I wouldn’t mind one to Giant (where we shop) and I love them for Joann’s where I get my crafting stuff.

    Congrats on besting the Man.

  • http://blog.tufftrade.com miracletech

    Cool tip about the credit card, but what I really took away from your post was that you were helping a friend going through hard times. I think you just added to your “Net Worth”.

    miracletech’s last blog post..Day Trading Lesson: Roadmap Step 7

  • Jules

    I thought the same thing miracletech. Good job on being a good friend it sounds like to me! But secondly, nice to see Costco not keeping Visa and MC out!

  • http://www.financehabits.com RJ

    Thanks for the tip Hank. I remember the good old days when i’d come home from Costco and my family would say, “You got THAT for HOW much?”
    START RANT:
    Sadly that is no longer the case.
    2 weeks ago I bought 50 lbs. of rice for 14.99. Now the price jumped to $19.99. A 33% increase.
    My Costco membership expires in September and am seriously considering not renewing the $50 membership fee. I mean talk about diminishing returns.
    END RANT.
    Thanks for listening to my Costco rant :)

    RJ’s last blog post..Switched Car Insurance, Saved Half.

  • http://myinvestingblog.com hank

    @MrsMicah – I hear you, I’m not a gift card fan either. The point is to get you there to spend more than they’re worth so I usually spend them down to a few bucks and then forget about them, but I think I’d use the Costco one.

    @Miracletech – thanks for the kudos. I like to help when we can; it’s a good feeling to help others out when you’ve got the leg up. You may not have that leg up sooner or later and need their help.

    @Jules – thanks to you too!

    @RJ – No problem ranting, that’s the point of blogs, eh? Isn’t everyone out there to rant? :) I agree with you though, it ain’t what it used to be! Maybe we should start an underground ring of Costco memberships that we all use a few accounts under the Business Name card and then split the 2% we get back at the end… Wonder what they $ would be then… :)

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  • Dave_Monget

    Great advice guys! I’ll definitely buy the costco cash card instead of using my debit card. Great tip for friends as well, thanks!

  • Brian

    It’s been awhile since I’ve used any gift cards, but seem to remember times when the stores would actually give me $ back as change if I didn’t spend down the entire gift card. You’ll have to check individual company policies, but you might even be able to get $5 or something back from Costco if you bring your gift card down to near $0. Maybe a good side benefit to earning those skymiles with gift cards and coming out the other end with cash rather than Costco goods (even if just a few dollars worth).

  • http://myinvestingblog.com Donna Winters

    I’m a big fan of Alaska Airlines Visa cards and I use mine whenever possible. Costco is not one of those places. However after looking into their AMX offer it looks pretty good. To get a ticket with my Alaska Air miles takes a minimum of 20,000 to 30,000 which means I must spend $1 dollar per mile equaling $20,000. The Costco AMX card gives a 1% cash back option which can be used to purchase an airline ticket or can also be spent on anything, not just an airline ticket. There is no yearly fee to AMX for the card, it does not cost $10 to activate and it looks like now they are also offering 3% back on gas which at todays prices comes to about 12 cents a gallon. Think about it with the Alaska Airlines Visa you get 1 mile per dollar which equals 1% and you HAVE to spend it on an airline ticket. You have no option of using the rebate for anything else. And the 12 cents a gallon on gas is an added plus.

  • Jason

    my wife discovered this loophole as well.
    i just recently called my local costco and asked if i could
    cash out my cash card, and to my suprise she said i could.
    all i have to do is get a supervisor to do it for me.

    after hearing this i went online and ordered two $600 gift cards(the limit is $1K per card and i don’t think there is a limit to how many), which we’ll both use for costco gas and food.
    my plan is to see how easy it is to cash out and if it proves to not be a problem, i am going to purchase an additional $2K worth of cards per month, cash out, redeposit into my banking account and get those air miles from my mortgage payment.
    i’m sure that would interest you.
    it sounds to good to be true.
    we’ll see.

  • http://myinvestingblog.com hank

    @Jason – AWESOME news – Please do let us know for sure if it works! Interested in doing it myself!

  • Jim Casey

    I don’t think a manager would let you cash out $2k gift cards, especially on a regular basis – Good luck with that! Plus the value of a $100 in miles is about $1. I don’t think I’d want to chance buying $2000 worth of Costco credit and then not be able to cash it out, simply for a $20 return.

    However, another interesting question.

    Do you have to be a member to buy a Costco gift card? How about to use one? If you don’t have to be a member to buy or use, then theoretically you could just buy and use gift cards instead of paying the annoying annual fee… and you could use a credit card. Just something I was curious about.

    I agree that Costco and Sams really aren’t that great of deals anymore which is why I dropped my membership. However, I might go and get the salmon or a few things I like there if I could bypass the membership fee with gift cards…

  • http://myinvestingblog.com hank

    @Jim Casey – good call on the not lettting them cash out 2k, but I wonder if they’d be against small cash outs. Buying the cards are 100% free online(no shipping/handling/tax) – so if you wanted to, it wouldn’t cost trying. I can’t see a manager getting that upset cashing out a couple hundred every couple weeks; but yes, 2k chunks at a time might be a bit obvious. :)

    As far as needing to be a member to use a gift card, looks like you do NOT (as perYahoo Answers) need to be a member to use the card. However you DO need to be a member to BUY one.

    Thanks for stopping by!

  • Jason

    I agree with you Hank.
    I will be pleasantly surprised if i get money back and no questions asked.
    My plan now is to buy a $100 or so in purchases and see if there is any hesitation
    or reluctance to cash out my remaining 5 hundy.
    Baby steps.
    If it proves to be a cake walk then the 2K option will seem more possible.
    We’ll see.
    Give me some time.

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  • Jason

    I’m finally back.
    3 weeks ago we went shopping at costco for a camping trip.
    After paying for the purchases there was $450 remaining on the cash card.
    I stated that i would like to cash out the remaining balance.
    A clerk/manager(not sure) came up to my checker, inserted a key or pressed a few buttons on the register.
    My checker handed me the cash.
    Thats it.
    It could not have been easier.

  • http://myinvestingblog.com hank

    @Jason – thanks for the update, I’ve gotten it to work as well thanks to you sir! :)

  • Joans

    I was given a gift card as a bonus from work and went to Costco (in Montreal) to apply to be a member thinking I had to be one to use the card. When the clerk saw that I had a gift card, she said we didn’t have to be members to use it which was great for me since I don’t shop there very often.

    So for over a year, I was going there and using my gift card with no problem..until yesterday when I wanted to return something. The manager (I assume) said I couldn’t use the card if I wasn’t a member and promptly took away the card and gave me back the remaining cash saying I could shop there anymore unless I become a member. It was like a slap in the face!

    There could have been a warning or a “next time” comment..but no. The way he handled it does not make me want to be a member, ever!

    So my question is whether you really can use the gift card if you’re a non member or not. It looks like I got two answers from the same place within a year.

  • http://myinvestingblog.com hank

    @Joans – I went there today actually – and apparently I’m just confusing you more, as they said there was no problem member or no member. :( My guess is that it goes something along the lines of “prices and participation may vary”.
    :)

  • Joans

    Thanks Hank.

    I checked the Costco website and in the section of cash cards, it says non members can shop there after all. You just have to pay 5% more.

    I look forward to printing out that page and showing this to the manager who took my gift card away!

  • Amy

    Late to the party as usual.

    I have both the Alaska Airlines card and the the Costco Amex card. When living in Alaska, the airlines card was the best deal, but I used the Amex card for gas and, of course, Costco. Now, we’re on the east coast and the Costco card is better for us. I am not as interested in flying, now that I can actually drive somewhere! So, I am more interested in the cash for the trip instead of air miles.

    What I really wanted to mention is regarding the executive membership, which also have. We upgraded because we calculated that we were spending enough to cover the entire executive membership fee and then some. We haven’t changed either. We used to save big purchases for when we got the rebates (we get a rebate for both the Costco Amex card and the executive membership), now I save the money for trips (of course!)

    As for the cost of items, I agree that sometimes you can get a better price somewhere else. I currently cannot drive and I am not going to shop at Costco from the bus or taxi! So, the whole family shops on the weekends and we only go to a few places, Costco being one of them. I know what used to be cheaper from shopping around and I know price compare from my few regular stores. One thing the east coast needs is a few Fred Meyer stores! Walmart just doesn’t compare!

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  • http://watchlivesportsnet.info/ Homer S

    What a good idea. I also don’t have the amex card. Give it up long time ago.

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  • N

    What if the Costco cash/gift card gets lost or stolen during shipping?
    Can someone else use it?

  • http://vxcl.org registry

    Yes, someone can use it. I heard of this case before.

  • N

    Maybe Costco should mail the gift card separately from a “card activation code” (which can be emailed), maybe?
    Otherwise, its almost like mailing cash!

    All one has to do is lose one of these cards in the mail, and the whole deal is ruined.

  • Pzilla

    Just checked the website. Looks like non-members can make purchases with a cash card, and I see no mention of the 5% higher prices an earlier poster described. Nice!

    http://www.costco.com/Browse/ProductSet.aspx?Prodid=10024438

  • Christine

    One problem with this is that you would have to spend the complete $300 in order for it to work, of course you can spend $298 and then refill, but you may always not spend the exact amount the next time around, you may have $1-2 left at all at times, that is what your sky miles would be worth 2% or so of you what you buy.

  • cl

    No you don't have to Spend the Complete amount. Buying the Gift Card with your Credit card gets you instant miles (i.e. spending $300) and you can spend that $300 at costco in any manner desired.

    Great idea Hank!

  • http://forexgeek.org Jud

    Costco is very unusual in this aspect. It seems that although their bottonline is very healthy, they are a bit lacking in certain aspects like finance.

  • Mikejones1846

    Only drawback is that you are giving cotsco a $300 loan with no interest untill you use the gift cards value buying stuff.

  • http://forex-automoney.info Roger

    Yes, they are very unusual. They operate with very outdated policies.

  • Jaredmeyer

    When you use American Express for your purchases, you get automatic extended warranties and 90-days purchase protection on items. Using a Costco Gift Card won't provide you these valuable features.

  • Matt

    Thanks for the tip. I always feel like I'm losing out on “rewards” points when I shop at Costco. Not anymore.

  • nana

    I have a question. I got a costco cash card but I don't know what information costco needs to activate. Could you help me? Thanks.

  • http://www.facebook.com/alokdelta78 Alok Kumar

    Well Hank,When you use American Express for your purchases, you get automatic extended warranties and 90-days purchase protection on items
    http://www.1500paydayloan.net/

  • Zhlf

    Costco cash cards are currently unavailable for sale on costco.com.

  • ds

    This gig is up. They are no longer sold online.

  • Dean

    I also have some Great news for everybody who shops at Costco, Sam's Club, Walmart, or anywhere else.
    You can actually go to my site and get a $335 gift card for $250. Plus you can get another $235 giftcard for $140. If you buy these cards every two weeks, you'll save exactly $2,471 in a year. You can't beat this. You can call Dean at 805-649-1599. http://www.USASavingsPlan.com

  • http://islandofcool.wordpress.com/ Joe Island

    Very clever! We kind of go on and off using Costco – usually when we need to buy something that will save enough to pay for the membership, we do so. The AmEx thing is a bother – we usually just go with cash, but I don't like carrying that much around. Sounds like there might be a problem with the cards though (according to Zhlf below) – will have to go and check.

  • Hersh007

    You can do this at SamsClub.com now AND you can use those cards at Walmart too.

  • Brian

    The reason that costco uses only the american express card is that they were able to offer the lowest merchant fee for costco after the discover card. Low merchant fee means that costco is able to have lower prices… plain and simple. The mark up for merchandise is only 1-3% where as most businesses mark up 10-20% (one reason that other businesses are able to accept all cards, just like some businesses do not accept the amex card). Because of this costco makes money only on the factor of memberships not the merchandise. It is sometimes a hassle i imagine, but also with the amex card there is an additional 1 year warranty that is covered on merchandise paid in full with the amex. on top of that amex has no annual fee on the costco amex, as long as you are a member and that can range on normal amex cards.

  • Wanter of Miles

    Brilliant! I just ordered one! I’m with you- I want it for the miles.

  • islandgirl

    This is very clever as I, too, have been perturbed that I have to use my debit card and cannot use my mileage cards.  Will check it out!

  • Lasalopedesantillaises

    This is retarded. Simply get an AMEX, or move on. 300 miles is only 3$. If you’re dropping this much money in a store, the “rewards” should mean nothing. Enfin, people like you all don’t realise that the value of the dollar has actually decreased with the whole-hearted acceptance of these point systems. I have an AMEX Gold Card because of the benefits offered to card members. The points are just an afterthought. I don’t even consider points when making purchases. I have more important concerns in life.

  • Lucy

    But of course! DUH! If we can purchase things online from Costco.com using other credit cards, of COURSE we can buy gift cards using the same strategy! Thanks for the reminder!!! I HATE the AMEX card BTW. LOUSY customer service–another company that outsources its customer service off to India where they have idiots who can’t understand or speak English properly and just can’t communicate either.

  • Henry

    NO–YOU are retarded. You can’t just go apply for a credit card just because you want to shop at Costco. First of all, the more credit you apply for, the more risk there is of it adversely affecting your credit rating. Secondly, why the heck would anyone want a credit card where they have LOUSY customer service and LOUSY rewards??? Your inside-the-box answer is pat and unacceptable. This is from a financial expert.

  • Henry

    Yes they are. I just ordered one a minute ago.

  • Greg

    So what. If you’re buying groceries or gas, what kind of “extended warranty” do you need???