My wife and I do a lot of our grocery shopping at Costco and a few years ago signed up to become Executive Members, which means we get 2% cash back on nearly every purchase made at Costco. Last year the warehouse giant sent us a reward coupon in the mail for $176.61 and if you do the math that means we spent $8,825.50 – or $735 per month – at Costco in 2015.

I included the rebate in my budget under “rewards earned” even though it has no cash value and can only be redeemed at Costco locations. It also got me thinking about how shopping at Costco can throw a wrench into your calculations when determining which rewards credit card is best.

Related: Is the Costco Executive Membership worth the fee?

You see, most online calculators use general categories such as groceries, gas, and dining to help identify the credit card that gives you the best bang for your buck based on your personal spending habits.

Rewards cards that pay higher earning rates on grocery purchases, like the Scotia Momentum Visa Infinite or Scotiabank Gold American Express Card, come out ahead for individuals and families who spend a lot of their household budget on food.

The Costco effect on rewards calculations

But if your household is anything like mine and you do the majority of your grocery shopping at Costco, you can throw that calculation out the window because:

  1. Costco does not accept Visa or American Express cards, and;
  2. Costco is not categorized as a “grocery” merchant – it falls under “department store” or “other”

When I post our typical grocery-heavy monthly spend in the GreedyRates calculator it recommends the Scotia Momentum Visa Infinite card as the best option for earning credit card rewards:

Greedy Rates cash back

Note the monthly spending breakdown on the left. I entered $1,000 under ‘groceries’ to reflect our overall household spend in that category. But remember that Costco purchases aren’t eligible for the 4% category bonus that the Scotia Momentum Visa Infinite offers on grocery purchases because a) Costco doesn’t take Visa, and b) Costco stores have a different merchant code than other grocery stores.

Now watch what happens when I move our $735 monthly Costco spend from the grocery category to ‘other’:

Greedy Rates Costco Effect

The Scotia Momentum Visa Infinite card tumbles all the way down to sixth place – losing $265 cash back per year in the process. But the actual cash back number is even worse for the Momentum Visa Infinite because – again – Costco doesn’t accept Visa cards! We have to take out our $735 per month spend completely, which drops the Scotia card to just $380 cash back per year.

The cash back rewards king for a Costco shopping household like mine is the mbna rewards World Elite MasterCard. That’s because it pays 2% back on every purchase, regardless of the category, and including Costco purchases.

Also in the conversation is Capital One’s Aspire Travel World Elite MasterCard; the rewards credit card that we use for our everyday spending, including Costco. This card also pays 2% back on every purchase and its new redemption system lets you use rewards points to erase whole or partial travel purchases off your credit card statement

Final thoughts

While the Scotia Momentum Visa Infinite card reigns supreme for cash back rewards fans due to its 4% / 2% / 1% category bonus rewards structure, a good argument can be made for Costco shoppers to ditch the Visa altogether in favour of a MasterCard that pays 2% on every purchase.

In fact, I cancelled our Momentum Visa Infinite card earlier this year before the annual fee came due. As our family shifts more-and-more of our grocery spending to Costco, it made little sense to carry two everyday annual fee cards.

Readers: Does the Costco effect influence your choice of rewards credit cards?

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