Costco credit card reward strategy

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madbrain
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Costco credit card reward strategy

Post by madbrain »

[Moved into a new thread from: Bank of America/Merrill Edge - Preferred Rewards --admin LadyGeek]
tj wrote: Tue Apr 02, 2024 8:04 am Of course. I have 3 CCR. But there are better cards for groceries.
Which would those be, assuming groceries come from Costco ? The CCR gives 3.5% on that.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by terran »

madbrain wrote: Tue Apr 02, 2024 2:59 pm
tj wrote: Tue Apr 02, 2024 8:04 am Of course. I have 3 CCR. But there are better cards for groceries.
Which would those be, assuming groceries come from Costco ? The CCR gives 3.5% on that.
It has an annual fee, but Amex Bluecash preferred is 6% back on groceries.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by tj »

madbrain wrote: Tue Apr 02, 2024 2:59 pm
tj wrote: Tue Apr 02, 2024 8:04 am Of course. I have 3 CCR. But there are better cards for groceries.
Which would those be, assuming groceries come from Costco ? The CCR gives 3.5% on that.

I have no idea about Costco. I don't shop there. Citi custom cash gives 5% on up to $500 per month in your highest spend of various categories. Groceries are one of the categories
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madbrain
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by madbrain »

terran wrote: Tue Apr 02, 2024 3:06 pm It has an annual fee, but Amex Bluecash preferred is 6% back on groceries.
Costco no longer takes Amex, and codes as warehouse club on VISA.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by madbrain »

tj wrote: Tue Apr 02, 2024 3:23 pm I have no idea about Costco. I don't shop there. Citi custom cash gives 5% on up to $500 per month in your highest spend of various categories. Groceries are one of the categories
Thanks. It looks like this card is a MasterCard, and is not accepted at Costco. And we spend more than $500/month there.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by bbrock »

Costco is my main grocery store. Shop there weekly, you could always purchase electronic cash cards with your CCR set to online shopping. That way you get your 5.25% for online shopping, then you do your Costco shopping with the $500 cash card. Or you can get a physical card, just don’t lose it. Search this thread for the logistics of it. I gave up doing it just because it’s a little bit of a hassle and to tell you the truth there’s opportunity cost drop in that much cash guards. I probably was buying 1000 $2000 of cash cards per month or two.

Pardon the typos. I dictate.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by madbrain »

bbrock wrote: Tue Apr 02, 2024 6:42 pm Costco is my main grocery store. Shop there weekly, you could always purchase electronic cash cards with your CCR set to online shopping. That way you get your 5.25% for online shopping, then you do your Costco shopping with the $500 cash card. Or you can get a physical card, just don’t lose it. Search this thread for the logistics of it. I gave up doing it just because it’s a little bit of a hassle and to tell you the truth there’s opportunity cost drop in that much cash guards. I probably was buying 1000 $2000 of cash cards per month or two.

Pardon the typos. I dictate.
Thanks ! I may start doing that, since we spend a lot at Costco. 1.75% extra is worth it. I assume the 2% Executive rebate still applies.
How convenient are the Costco E-cards to use ? Do you see them in the Costco app ? Or is it an email with a QR code ?
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by Lyrrad »

madbrain wrote: Tue Apr 02, 2024 7:15 pm Thanks ! I may start doing that, since we spend a lot at Costco. 1.75% extra is worth it. I assume the 2% Executive rebate still applies.
How convenient are the Costco E-cards to use ? Do you see them in the Costco app ? Or is it an email with a QR code ?
There's previous discussions on this thread. (Search for "Costco").

Electronic cards arrive with an email link to a number+PIN and bar code that can be scanned by cashiers, food court, optical, or at self-checkout, but not gas. Haven't tried other departments.

Edit: I was mistaken about food court. I forgot I use a backup physical card for that.
Last edited by Lyrrad on Wed Apr 03, 2024 11:09 am, edited 1 time in total.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by madbrain »

Lyrrad wrote: Tue Apr 02, 2024 8:13 pm Electronic cards arrive with an email link to a number+PIN and bar code that can be scanned by cashiers, food court, optical, or at self-checkout, but not gas. Haven't tried other departments.
Thanks. Costco says the cash cards can't be used at food courts. Have you actually succeeded ?
https://www.costco.com/costco-shop-card ... 24438.html
Looks like they are also closing the food court to non-members.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by rustlers »

madbrain wrote: Tue Apr 02, 2024 2:59 pm
tj wrote: Tue Apr 02, 2024 8:04 am Of course. I have 3 CCR. But there are better cards for groceries.
Which would those be, assuming groceries come from Costco ? The CCR gives 3.5% on that.
For Costco, there are two options,
Use CCR to buy Costco shop cards to shop in store to get 5.25%.
I used to do this, but added a US Bank Altitude reserve to get me 4.5% back, without jumping through hoops.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by rustlers »

guppyguy wrote: Tue Apr 02, 2024 6:27 am
rustlers wrote: Mon Apr 01, 2024 9:59 pm
guppyguy wrote: Mon Apr 01, 2024 4:35 am
rustlers wrote: Sun Mar 31, 2024 11:31 pm
guppyguy wrote: Sun Mar 31, 2024 8:06 pm Currently we have an Alliant Credit Union card with 2.5% cash back but our spending outpaces the limits so it dilutes with the 1.5% bracket to come to about 2.1%

In addition, we bank with Schwab and have >100K assets in a taxable brokerage with them.

Pick this idea apart-
1) Open up BoA/ME combo transferring in 100K of etfs for preferred status.
2) Which credit card should I focus on utilizing at BoA? Heavy travel and eating out. I believe the answer is the Premium Rewards but it doesn't appear to be a cash back card.......
3) Close Schwab checking and open a CMA/Brokerage combo at Fidelity to handle cash flows in/out. Close Schwab brokerage transferring remains assets into Fidelity brokerage.

My main goals are: primary CC with consistent reward % AND to stop having to buy/sell Schwab money market funds just to not get ripped in their low FDIC account.

So is a Fidelity+BoA/ME PR combo pretty common here?

There is just so many moving parts to this.
On #2, you should get both the CCR and PR cards.
They are both essentially cash back cards. However, they serve different purposes, and your cash back will expand with both.
However, if you want only one, then yes PR is the one.
What category do most people setup their CCR for? Do Amazon purchases fall under a particular category? (I'm trying to make a case of replacing my Chase Amazon 5% rewards card).

I can see the allure of a PR+CCR card setup, if one only wanted 2 credit cards.
CCR set to online shopping is the broadest category, since so many purchases qualify.
So easy to recommend PR + CCR
CCR is capped at a COMBINED purchases of $2500 per quarter in the selected category and groceries, right? So if your household is spending at least $2500 per quarter on groceries, which is quite easy these days, then the selected category (online in this example) never to gets 3% (+bonus).

For example, if I put $4000 of selected category at 3% + $4000 of groceries at 2% (per quarter), their website shows a weighted cash back percentage of 2.29%. Not impressive. Seems easier to just use PR (unless people are using CCR for ONLY the 3% category and using PR on everything else)....even then, if you shift your Amazon purchases of 12K per year (this was our spending last year) it yields only 3.9%.

This doesn't sound convincing which means I'm probably not reading their website right. Or there are too many variables to optimize CCR+PR well so why not stick with just PR.
Right, it depends on your credit card strategy. If you want to hold only one, keep it for online shopping only and use PR for all else.

If you are ok with multiple CCR, then you can assign category based on $spend you put on it.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by madbrain »

rustlers wrote: Tue Apr 02, 2024 10:43 pm For Costco, there are two options,
Use CCR to buy Costco shop cards to shop in store to get 5.25%.
I used to do this, but added a US Bank Altitude reserve to get me 4.5% back, without jumping through hoops.
Thanks. I didn't know the Altitude Reserve gave 4.5% at Costco. That's pretty good. I am afraid I can't quite justify the annual fee at this time. I have held high AF cards before like the Sapphire Reserve. But it's just not in the budget now.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by FrugalProfessor »

madbrain wrote: Tue Apr 02, 2024 8:50 pm
Lyrrad wrote: Tue Apr 02, 2024 8:13 pm Electronic cards arrive with an email link to a number+PIN and bar code that can be scanned by cashiers, food court, optical, or at self-checkout, but not gas. Haven't tried other departments.
Thanks. Costco says the cash cards can't be used at food courts. Have you actually succeeded ?
https://www.costco.com/costco-shop-card ... 24438.html
Looks like they are also closing the food court to non-members.
Physical Costco Cash cards can be used at:
* Warehouse,
* Pharmacy,
* Food court,
* Gas, and
* Online (via card number, of course)

I don't think digital cards can be used at the following:
* Pharmacy,
* Gas,
* Food court

We spend about $20k annually at Costco (groceries, pharmacy, gas, clothes, etc). By jumping through the extra "costco cash" hoop relative to the baseline 3.5% grocery/wholesale rewards from the CCR, we earn an extra $20k*1.75%=$350/yr (tax free), or ~$30/mo (tax free). Seems worth the ~5min/month it takes to do. Plus, it satisfies the optimization compulsion.

I time the purchase of the digital costco shop card to coincide with the first day of my CC cycle to eliminate any excess cash drag and to maximize float.
I blog here: https://www.frugalprofessor.com/
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Re: Costco credit card reward strategy

Post by Oddball »

I am sure this has been answered somewhere already but, does buying gas at Costco count the same as using the CC inside Costco, or is the gas charge coded different?
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by bbrock »

FrugalProfessor wrote: Wed Apr 03, 2024 7:15 am
madbrain wrote: Tue Apr 02, 2024 8:50 pm
Lyrrad wrote: Tue Apr 02, 2024 8:13 pm Electronic cards arrive with an email link to a number+PIN and bar code that can be scanned by cashiers, food court, optical, or at self-checkout, but not gas. Haven't tried other departments.
Thanks. Costco says the cash cards can't be used at food courts. Have you actually succeeded ?
https://www.costco.com/costco-shop-card ... 24438.html
Looks like they are also closing the food court to non-members.
Physical Costco Cash cards can be used at:
* Warehouse,
* Pharmacy,
* Food court,
* Gas, and
* Online (via card number, of course)

I don't think digital cards can be used at the following:
* Pharmacy,
* Gas,
* Food court

We spend about $20k annually at Costco (groceries, pharmacy, gas, clothes, etc). By jumping through the extra "costco cash" hoop relative to the baseline 3.5% grocery/wholesale rewards from the CCR, we earn an extra $20k*1.75%=$350/yr (tax free), or ~$30/mo (tax free). Seems worth the ~5min/month it takes to do. Plus, it satisfies the optimization compulsion.

I time the purchase of the digital costco shop card to coincide with the first day of my CC cycle to eliminate any excess cash drag and to maximize float.
Hi Frugal. It was your post that actually got me into the idea of doing the same at Costco, as we spend approx. similar to you; Costco is our weekly store (if not more). However, it was a fellow Boglehead conversation here that discussed lost opportunity cost tying up that much cash with Costco with rates up. I ran the numbers for myself, and indeed it was almost a wash in the end vs. just using the CCR for 3.5% back.

I felt like I was gaming the system with this technique, but in the end, the math proved me wrong that it was work for no reward (besides psychological). Others mileage may vary, but realize, like Frugal, I believe I'm at the upper-end of Costco spending. Thus, spending even less there and using this technique surely may not be worth it.
Last edited by bbrock on Wed Apr 03, 2024 9:49 am, edited 1 time in total.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by bbrock »

Smart to break this discussion up LadyGeek, as it get re-circled numerously in the BofA thread.
Last edited by bbrock on Wed Apr 03, 2024 9:48 am, edited 1 time in total.
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Re: Costco credit card reward strategy

Post by bbrock »

Oddball wrote: Wed Apr 03, 2024 9:42 am I am sure this has been answered somewhere already but, does buying gas at Costco count the same as using the CC inside Costco, or is the gas charge coded different?
Gas is gas. Store is shopping.
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Re: Costco credit card reward strategy

Post by CletusCaddy »

The Shop Your Way Mastercard has consistently offered me $70 cash back on $1000 in monthly online purchases.

There is another 1% base cash back on top of that, so I am getting 8% off Costco by buying the digital shop cards.
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Re: Bank of America/Merrill Edge - Preferred Rewards

Post by madbrain »

bbrock wrote: Wed Apr 03, 2024 9:45 am Hi Frugal. It was your post that actually got me into the idea of doing the same at Costco, as we spend approx. similar to you; Costco is our weekly store (if not more). However, it was a fellow Boglehead conversation here that discussed lost opportunity cost tying up that much cash with Costco with rates up. I ran the numbers for myself, and indeed it was almost a wash in the end vs. just using the CCR for 3.5% back.
I'm curious how your math works. Deposit rates are about 5%. You can buy 3 Costo cards of $500 each month , one $100 card and one $50 card. You would be tying up only $1650 on average throughout the year. That would yield only $82 of taxable interest.
On the other hand if you spend all the gift cards, it adds up to $19800 spending. When using the CCRa directly, you get 5.5% (3.5 + 2 for Executive).
If you buy the cash cards, you get 5.25 + 2 or 7.25% .
That's an extra 1.75% cash back, which is not taxable. On $19800 it represents $346/year. Vs $82 taxable if you don't buy the cash cards.

We spend a bit less at Costco than you usually, but it is probably still about $10-12k. We have 2 CCRs.
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Re: Costco credit card reward strategy

Post by guitarguy »

This may have already been said, but to my knowledge this one is easy and has a hands down clear winning method:

1. BoA Custom Cash rewards credit card
2. BoA Preferred rewards (75% rewards bonus achieved with $100k assets at Merrill Edge)
3. Costco Executive membership
4. Buy Costco cash cards online, shop in store (or just shop online for larger specific items)
5. 7.25% total cash back (including credit card and executive membership).

8-)

Granted, it does take a little effort to setup, and you have to buy the cash cards, but it's all super easy and takes pretty minimal effort.
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Re: Costco credit card reward strategy

Post by GaryA505 »

guitarguy wrote: Wed Apr 03, 2024 11:01 am This may have already been said, but to my knowledge this one is easy and has a hands down clear winning method:

1. BoA Custom Cash rewards credit card
2. BoA Preferred rewards (75% rewards bonus achieved with $100k assets at Merrill Edge)
3. Costco Executive membership
4. Buy Costco cash cards online, shop in store
5. 7.25% total cash back (including credit card and executive membership).

8-)

Granted, it does take a little effort to setup, and you have to buy the cash cards, but it's all super easy and takes pretty minimal effort.
Can Costco cash cards be used outside the US?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Costco credit card reward strategy

Post by guitarguy »

GaryA505 wrote: Wed Apr 03, 2024 11:03 am
guitarguy wrote: Wed Apr 03, 2024 11:01 am This may have already been said, but to my knowledge this one is easy and has a hands down clear winning method:

1. BoA Custom Cash rewards credit card
2. BoA Preferred rewards (75% rewards bonus achieved with $100k assets at Merrill Edge)
3. Costco Executive membership
4. Buy Costco cash cards online, shop in store
5. 7.25% total cash back (including credit card and executive membership).

8-)

Granted, it does take a little effort to setup, and you have to buy the cash cards, but it's all super easy and takes pretty minimal effort.
Can Costco cash cards be used outside the US?
We've never needed to, so I'm honestly not sure. I'd check the terms of the card when purchasing.
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Re: Costco credit card reward strategy

Post by Lyrrad »

madbrain wrote: Tue Apr 02, 2024 8:50 pm
Thanks. Costco says the cash cards can't be used at food courts. Have you actually succeeded ?
https://www.costco.com/costco-shop-card ... 24438.html
Looks like they are also closing the food court to non-members.
I misremembered. I corrected my original post.

GaryA505 wrote: Wed Apr 03, 2024 11:03 am Can Costco cash cards be used outside the US?
Electronic and physical cards can be used in Canada at a good exchange rate. Physical US cards can’t be reloaded in Canada and vice versa.

It’s cheaper to renew in person in Canada, and you can do it up to six months in advance. If you renew before they send you the notice, it messes up the automatic Executive rewards mailing and it can be delayed several months.
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Re: Costco credit card reward strategy

Post by FrugalProfessor »

Lyrrad wrote: Wed Apr 03, 2024 11:13 am
madbrain wrote: Tue Apr 02, 2024 8:50 pm
Thanks. Costco says the cash cards can't be used at food courts. Have you actually succeeded ?
https://www.costco.com/costco-shop-card ... 24438.html
Looks like they are also closing the food court to non-members.
I misremembered. I corrected my original post.

GaryA505 wrote: Wed Apr 03, 2024 11:03 am Can Costco cash cards be used outside the US?
Electronic and physical cards can be used in Canada at a good exchange rate. Physical US cards can’t be reloaded in Canada and vice versa.

It’s cheaper to renew in person in Canada, and you can do it up to six months in advance. If you renew before they send you the notice, it messes up the automatic Executive rewards mailing and it can be delayed several months.
I've swiped physical costco cash cards in canada with no issues (gas, food court, warehouse). Exchange rate was favorable.

Timely comment on Canadian renewal, Lyrrad. I'm traveling to Canada over the summer during my renewal window and was considering renewing up there for the costs savings ($120 CAD < $120 USD). Do you happen to know if there are any implications on my membership if I renew in Canada? For example, will I lose my (dormant) Citi Costco card? Will I forfeit executive bonuses for US spend?
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Re: Costco credit card reward strategy

Post by Lyrrad »

FrugalProfessor wrote: Wed Apr 03, 2024 11:24 am
Timely comment on Canadian renewal, Lyrrad. I'm traveling to Canada over the summer during my renewal window and was considering renewing up there for the costs savings ($120 CAD < $120 USD). Do you happen to know if there are any implications on my membership if I renew in Canada? For example, will I lose my (dormant) Citi Costco card? Will I forfeit executive bonuses for US spend?
Renewing in person in Canada extends membership expiry by a year.

Unlike some US states, Costco membership is taxable in Canada by at least 5%, depending on province.

Since executive rebates are normally sent with renewal notices, renewing before it is sent can result in the rebate being delayed an indeterminate amount of time until presumably someone in an office notices and mails it out. (I think you are allowed to renew earlier in Canada, which causes this problem.)
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