School me on rewards CC

[pikergolf]

So I got approached at Costco about their new credit card, so much percent back for this, so much for that and so forth. No fee card. So how do they make their money? Are they banking on people not paying on time to avoid interest payments or people not being able to pay off the full amount? I use a credit card for online purchases but always pay it off before I pay interest. Do these reward cards work the same?

[Jerry D]

They charge a business say 3% processing fee so if a business sells 100$ visa charges them 3.00 then they give you 1.00 and make 2.00$.

They also make interest on unpaid bills.

For example, If your monthly statement is 5k and you only pay 4K, They actually charge you interest on the full 5k and not just 1k and it’s at like 20% a year which is insanely high


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[Jerry D]

Debt costs a business 10 cents a transaction for example. So if you buy a coffee for 1.00 the business loses 10%.

Debt is better for higher value transactions on the business end.

Some larger businesses probably have negotiated better rates but they get the smaller guys the worst.


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[CNP]

Originally Posted by pikergolf

So I got approached at Costco about their new credit card, so much percent back for this, so much for that and so forth. No fee card. So how do they make their money? Are they banking on people not paying on time to avoid interest payments or people not being able to pay off the full amount? I use a credit card for online purchases but always pay it off before I pay interest. Do these reward cards work the same?

I have the COSTCO cc for convenience. At the gas pump all you have to do it tap it instead of inserting your Costco membership card and then your other payment card. The COSTCO reward more than pays for for my annual membership. The new CIBC COSTCO card is the same as any card. Pay it off in full every month and that is all you pay.

[flyrodfisher]

Just a FYI;

To pay for your $120 membership card you need to purchase $6000 annually at Costco.

Costco gas/alcohol/optical/prescription/food court/tobacco/etc purchases are excluded from that $6000

[Jerry D]

Where did you figure you need to spend $6000.00?

Quite often we buy items that are on sale or clearance that seem to be much better value than elsewhere that we make back our $120 fairly quickly, or so it seems!?

[flyrodfisher]

Originally Posted by Jerry D

Where did you figure you need to spend $6000.00?

Quite often we buy items that are on sale or clearance that seem to be much better value than elsewhere that we make back our $120 fairly quickly, or so it seems!?

Note...we were talking about the Costco rewards card...

You get 2% back off your purchases.
2% of $6000 is $120....which is equal to your membership fee.

so...once you have spent $6000 on those restricted items you have paid for the membership fee.

Works for some....not for me though...

[Jerry D]

Originally Posted by flyrodfisher

You get 2% back off your purchases.
2% of $6000 is $120....which is equal to your membership fee.

so...once you have spent $6000 on those restricted items you have paid for the membership fee.

Works for some....not for me though...

Your not taking into account all the deals to be had! Like saving $10.00 off on your lunch when you get the $1.50 hotdog! Or all the other deals that make you buy in bulk and spend a few hundred bucks per trip! Haha.

Personally I always enjoy my trip to Costco. Such a unique store. Even if they charge me to be a member.

But yea that’s the jist of the cc. Give you rewards so you use it. Charge the seller a greater amount to accept it and charge interest on unpaid bills.


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[flyrodfisher]

Originally Posted by Jerry D

Your not taking into account all the deals to be had! Like saving $10.00 off on your lunch when you get the $1.50 hotdog! Or all the other deals that make you buy in bulk and spend a few hundred bucks per trip!

Agreed.,,,but you can get those with the regular cheaper membership

[Hawkeye]

And I believe you can purchase products from COSTCO Liquor without a COSTCO card.........

[270person]

Originally Posted by pikergolf

So I got approached at Costco about their new credit card, so much percent back for this, so much for that and so forth. No fee card. So how do they make their money? Are they banking on people not paying on time to avoid interest payments or people not being able to pay off the full amount? I use a credit card for online purchases but always pay it off before I pay interest. Do these reward cards work the same?

Very simply, if you have their card they know you're going to use it. A lot. Buying a lot more things than you probably would normally. They're just trying to tie you to their store the same as any other retailer points/rebate card. $10,000 to get back $200. Woo-hoo. Knock of $60 for the privilege of shopping here membership and you've banked $140 If you're running your business on a card like that it might make sense.

I prefer to accrue other things such as flight points and use the card anywhere i want to accrue them. Amex, Avion, etc. You're not limited to depending your money in one store. Even the Westjet Mastercard gives a discounted partner flight voucher every year whether you use the card or no. Free extra bags check-in also.

[urban rednek]

Originally Posted by flyrodfisher

Note...we were talking about the Costco rewards card...

You get 2% back off your purchases.
2% of $6000 is $120....which is equal to your membership fee.

so...once you have spent $6000 on those restricted items you have paid for the membership fee.

Works for some....not for me though...

There is a regular membership ($60) and an executive membership ($120). The executive membership gets monthly offers that are not available to regular members and gets an annual 2% rebate/reward on qualified purchases. The fine print indicates the maximum rebate is $1,000/year.

If you purchase more than $3,000 of qualified items on a yearly basis, it makes sense to purchase the executive membership, as the yearly rebate will subsidize your membership fee. ie. $4500 at 2% = $90. That makes the real cost of your $120 executive membership $30.
FTR- Our rebate more than covers the annual fee, meaning our membership is effectively "free". If we only had the regular membership, it would still cost $60 on top of our annual purchases.
FWIW- I bought my first regular membership when I figured out I could save more than the $55 (at the time) fee every 6 weeks on smokes and gas.

OT- Now that Costco has dropped Capital One (spit), the new CIBC Costco M/C deal looks OK. Here are the basic details:
•No annual fee,
•3% rebate from restaurants and Costco gas,
•2% rebate from other gas stations and Costco.ca (notice that is online purchases) The fine print sets yearly value limits ($5,000 & $8,000) where the 2% rebate will drop to 1% once the purchase value is reached.
•1% rebate on Costco in store and all other purchases.

Combine the CIBC M/C with the executive membership to get additional rebates on stuff you are buying anyways. Seems simple enough.

[wallz]

Originally Posted by pikergolf

So I got approached at Costco about their new credit card, so much percent back for this, so much for that and so forth. No fee card. So how do they make their money? Are they banking on people not paying on time to avoid interest payments or people not being able to pay off the full amount? I use a credit card for online purchases but always pay it off before I pay interest. Do these reward cards work the same?

Ben using a CIBC dividend card for years. As long as you always pay your CC off every month, and don't pay them interest, they pay you at the end of the year. They credit your account usually Feb statement, but this one may be different.

Its great, I get about $1300 every year free, to spend on more gun parts. For the last 12 years or so. Put all gas and grocery, and gun parts purchases on it, among other things.

[artie]

Just got sucked in by Costco
Got an email stating if I renew my old membership they would give me a $50.00 coupon
But in another email I got notification to get the $50.00 I would have to spend $150 on line
Yes it is there in the fine print
Also with the new costco credit card they can put your yearly membership fee on the card without your permission
But if you go through the process of cancelling your membership then you also lose the credit card
It is all about a win win for costco