Can You Use Discover Cards at Costco? An Expert Guide for Savvy Shoppers

If you‘re a frequent Costco shopper, you‘ve likely noticed that the retailer doesn‘t accept all types of credit cards. Notably, you can‘t use your Discover card to pay for purchases in Costco warehouses. As a retail expert and self-proclaimed "picky shopper," I‘m always looking to understand the policies and motivations behind how major chains operate.

So let‘s take a deep dive into Costco‘s credit card stance, the impact on Discover cardholders, and what it means for the broader world of retail rewards. Trust me, there‘s more to this story than meets the eye!

The Basics of Costco‘s Exclusive Visa Partnership

First, some background. Since 2016, Costco has had an exclusive partnership with Visa, meaning Visa is the only credit card network accepted at Costco stores. Prior to that, Costco actually had a similar 16-year arrangement with American Express. When that contract ended, Visa swooped in and secured the new exclusive deal.

As part of the agreement, Citi rolled out a new Costco Anywhere Visa Card, which became the successor to the former Costco-branded American Express card. The new Costco Visa offers cardholders 4% cash back on eligible gas purchases (including at Costco gas stations), 3% back on restaurant and travel purchases, 2% back on all Costco purchases, and 1% back everywhere else.

While the perks are certainly enticing for Costco regulars, the Visa requirement means that anyone who previously used a Discover card (or Mastercard or Amex, for that matter) in-store at Costco is now out of luck.

So why would Costco limit customer payment options in this way? The answer comes down to two key factors: merchant fees and market share.

How Costco Benefits from Lower Merchant Fees

Every time you swipe a credit card, the merchant pays a percentage of the transaction total to the card issuer. These "interchange" or "swipe" fees vary depending on the specific card, but generally range from about 1.5% to 3.5%.

Here‘s how the major card networks stack up on average merchant fees:

Card Network Average Merchant Fee
American Express 2.3%
Discover 1.85%
Mastercard 1.55%
Visa 1.43%

Sources: The Motley Fool, Value Penguin

As you can see, Discover and American Express charge higher merchant fees on average than Mastercard and Visa. For a low-margin, high-volume business like Costco, those percentages add up fast.

By negotiating an exclusive deal with Visa, Costco is able to secure lower merchant fees than it would by accepting multiple card networks. Analysts estimate that Costco pays just 0.4% in credit card fees with the current Visa arrangement, compared to the 2%+ it was previously paying to American Express.

Those lower fees save Costco a huge amount of money. With over $150 billion in annual revenue as of 2020, even a fraction of a percent savings in merchant fees can translate to hundreds of millions of dollars staying in Costco‘s pockets instead of going to the card networks.

In fact, part of the reason Costco ended its Amex deal was that the companies couldn‘t come to terms on merchant fees. American Express balked at Costco‘s demands for lower rates, while Visa was more willing to cut Costco a deal. The Visa partnership is expected to save Costco at least $220 million annually compared to the prior Amex arrangement.

The Role of Credit Card Market Share

Merchant fees aren‘t the only factor in Costco‘s calculus, however. Credit card market share also plays a key role.

Visa is by far the dominant credit card network in the US, with a 53% market share in 2020. Discover, by contrast, accounts for just 7% of purchase volume.

Card Network Market Share by Purchase Volume (2020)
Visa 53%
American Express 18%
Mastercard 22%
Discover 7%

Source: Nilson Report

For Costco, it makes sense to partner with the card network that will enable the greatest number of customers to pay with credit. Visa simply has a much broader cardholder base than Discover.

An estimated 336 million Visa credit cards are in circulation in the US, compared to around 57 million Discover cards. That means roughly 83% of American adults have a Visa credit card, while just 18% have a Discover card.

What‘s more, Discover‘s strongest market is the US, with very limited acceptance internationally. That‘s a drawback for Costco given its growing overseas presence, with warehouses in Canada, Mexico, Japan, Korea, Australia and several other countries. Visa and Mastercard, by contrast, are truly global networks accepted by millions of merchants worldwide.

How Costco‘s Policy Stacks Up to Other Retailers

Costco isn‘t the only major retailer to have an exclusive credit card deal, but it is somewhat of an outlier in not accepting Discover or other major networks (with the exception of, which we‘ll get to later).

Most other large retailers take a broader approach to credit card acceptance. Walmart, for example, accepts Visa, Mastercard, Discover and American Express. Same goes for Target, Walgreens, CVS, and Kroger. Some of these retailers have their own store credit cards, but they aren‘t restrictive about general credit card acceptance.

One notable exception is Sam‘s Club, Costco‘s biggest rival in the wholesale club space. Sam‘s Club has an exclusive deal with Mastercard, so it doesn‘t accept Visa, Discover or Amex cards in-store.

Retailer Visa Mastercard Discover American Express
Costco (in-store) X X X
Sam‘s Club X X X

A few other retail chains are similarly selective with credit cards, but the practice isn‘t widespread. Neiman Marcus and Saks Fifth Avenue, for instance, each have an exclusive co-branded card with Mastercard and don‘t accept Visa or Discover in-store.

On the flip side, some retailers are starting to embrace even more payment methods beyond the major card networks. A growing number of stores now accept PayPal, Venmo, and mobile wallet apps like Apple Pay and Google Pay. Costco has been somewhat slow to jump on this bandwagon, but it did start accepting Apple Pay in 2018.

The Workarounds for Discover Cardholders

Now, what if you‘re a Discover die-hard who still wants to shop at Costco and rack up rewards? You have a few options.

Use Discover at

One noteworthy workaround is that you can use your Discover card when shopping online at or in the Costco app. Costco‘s credit card exclusivity only applies to in-store purchases.

When paying for your order, you can use a Discover (or Mastercard) in addition to Visa. You can even earn extra rewards by shopping through the Discover Deals portal, which occasionally offers bonus cash back at on top of your regular rewards rate.

A caveat: Some items sold online, like electronics, may be available for in-store pickup at your local Costco. But you‘ll have to pay online with an accepted card first. You can‘t place an order online with Discover and then pay in-store with your Costco Visa card.

Buy Costco Shop Cards with Discover

Another option is to purchase Costco Shop Cards (i.e., gift cards) through the Costco website or at other retailers. You can buy these cards with any credit card, including Discover, and then use them for in-store purchases at Costco.

The main catch is that you need to be a paid Costco member in order to buy a Shop Card on And you‘ll still need to show your membership card at checkout in-store even when paying with a Shop Card.

One potential "hack" is to buy Costco Shop Cards at other retailers that sell them, like Walmart or Walgreens. This way you could use your Discover card to purchase the cards and then use them at Costco without an active membership. Just be aware that not all Costco locations may accept Shop Cards that were purchased from third-party retailers.

Use a Discover Card with Digital Wallet Apps

At many retailers, you can now use a digital wallet app like Apple Pay or Google Pay to pay with your Discover card. Unfortunately, Costco does not currently support digital wallet payments with Discover.

You can use Discover with Apple Pay at other retailers that accept contactless payments. But at Costco, you‘ll need to use a physical Visa card or debit card, even when paying with a mobile wallet.

Get a Visa Card as a Backup

If you want to maximize your ability to pay with credit and earn rewards everywhere you shop, consider adding a Visa card to your wallet in addition to Discover.

Having both a Discover and Visa will cover you at the vast majority of US retailers. It‘s a good idea to have cards from multiple networks so you‘re never caught in a bind at the checkout counter.

When choosing a Visa card, look for one that complements your spending habits and doesn‘t charge an annual fee (unless the perks justify it). Some of my top picks include:

  • Chase Freedom Unlimited: Earn at least 1.5% cash back on all purchases, including 3% back at drugstores and dining.
  • Bank of America® Cash Rewards: Earn 3% cash back on a category of your choice (gas, online shopping, dining, etc.) and 2% back at grocery stores and wholesale clubs on up to $2,500 per quarter.
  • Capital One Venture Rewards: A great option for travelers, with 2X miles on every purchase and a big sign-up bonus.

Of course, if you‘re a frequent Costco shopper, the Costco Anywhere Visa should also be on your radar for its bonus rewards at Costco and on gas, dining and travel. Just be sure to pair it with another card so you can still earn rewards where Visa isn‘t accepted.

The Bottom Line

Costco‘s exclusive credit card partnership with Visa is a boon for many shoppers who now earn bonus rewards on every purchase. But it‘s undoubtedly a bummer for Discover cardholders who have far fewer opportunities to use their favorite card in-store.

Costco‘s credit card policy is rooted in economics, not any particular bias against Discover. By accepting only Visa, Costco aims to save money on merchant fees while ensuring the broadest possible access for members.

That said, I believe Costco should be more transparent with members about the reasoning behind its credit card stance. Some folks may not realize what they‘re giving up in terms of payment flexibility and rewards potential, especially if they carry a Discover or Amex that earns lucrative category bonuses.

As a savvy shopper, I always advocate for consumers to have a diverse credit card lineup that maximizes rewards and minimizes fees. While I respect Costco‘s prerogative to limit its payment options, I also think it‘s important for folks to understand the trade-offs involved.

The good news is that there are still a few ways for Discover cardholders to save at Costco, whether by shopping online, buying Shop Cards, or simply using a Visa card alongside Discover when possible. And of course, you can always vote with your wallet by shopping at other wholesale clubs or retailers that do accept Discover.

At the end of the day, credit card rewards are just one factor in the broader value proposition of shopping at Costco. The store‘s bulk deals, low prices, and members-only perks will likely keep loyal shoppers coming back, even if they can‘t always pay with their preferred plastic.