When you, as a credit card user, are hunting for ways to maximize rewards, attention-grabbing 5% cash back offers can be tempting. But can a card like the American Express Costco, which has static rewards categories, compete with the heavy hitter rotating bonus cards? But we’ve made no secret of our view that these cards rarely offer the best deals. They may be helpful additions to a combination of credit cards, but what if you just want one card? What if you don’t want to bother juggling multiple rewards programs and multiple monthly bills? You just want to find the one card that fits your spending habits the best and move on with your life. In that case, the Amex TrueEarnings Card from Costco might be exactly what you’re looking for.
You gotta look at more than just the top line rewards rate
The number five is a magic number in credit card marketing. Companies like Chase and Discover love to advertise their “5% cash back” rewards cards, but there is always a catch. They go out of their way to make it as hard as possible to redeem your rewards, so 5% is an elusive dream.
The Chase Freedom is a perfect example. It does pay 5% rewards on rotating categories, but these categories change on a quarterly basis. So to truly maximize your rewards, you have to keep track of the rotation schedule and concentrate your spending accordingly. For example, the bonus category is travel from July to September. This is great for summer travelers, but what if your schedule causes you to do most of your traveling in winter? Well, you don’t get the 5%.
Then there are the 2% credit cards – the other magic number. These cards are great because they pay you a solid 2% cash back on all of your purchases, setting them ahead of the “industry standard” 1%. The Fidelity Amex is one of the best examples, since you get cash every month auto-deposited into your Fidelity checking or brokerage account. What’s the catch? Well you have to bank with Fidelity, so they’re getting money out of you in other ways – through commissions, fees, and paying you meager interest rates on your deposits.
The Costco credit card covers all the bases
Rather than rotating reward categories on you, the Costco card pays the same rewards year-round. You can earn 3% cash on gas, 3% on restaurants, 2% on travel, and 1% everywhere else. There are no caps on any of the categories except gas (capped at $3,000 of gas per year). And these are categories that you probably spend money on every day of the year, not just during seasonal shopping sprees, so there is literally something in this card for everyone. Here’s a couple of examples.
Urban socialite? Well you are out a lot, eating and drinking with friends (3%), and then you drive to the beach on the weekends to get away from it all (3%). When the beach isn’t hot enough for you, you might just grab a few friends and fly south (2%).
Super parent? With both you and your husband commuting to work everyday (3%) and driving the kids to soccer practice (3%), you often don’t have time to cook at home, so you’ll pick something up on the way (3%). On those few occasions you get any vacation time, you round up the herd and take a trip to Disney World (2%).
The only catch in this case is that the “cash back” is only redeemable at Costco. But with more than 500 locations in the US, and a selection that covers everything from electronics, to gas, to fine wines, it’s hard to consider that much of a limitation.
Could the Costco Card be your Goldilocks?
Well that depends on how you spend your money, the answer isn’t the same for everyone. But with a rewards program like this, it’s hard to imagine there’s not something in it for you. Of couse, the best way to find out is to check out our credit card rewards calculator and see how it stacks up against the competition.
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