Cash or Credit Card: Which Will Help You Save More at Costco?

I'll be forthright: Nine times out of 10, using a credit card is the best method of payment. Most credit cards provide 0% fraud liability protection, which protects you against fraudulent transactions. They can also protect your purchases with travel and shopping insurance, like extended warranties. And don't get me started on credit card rewards (seriously -- we'll never get to Costco if I do).

But sometimes, Costco is that one of 10 that justifies using cash instead of a card. Although Costco doesn't itself provide incentives for cash payments -- like lower prices -- its members could end up saving more if they do. If you're a dedicated credit card user, or you're trying to save money at Costco, here's when paying in cash at Costco could work in your favor.

Cash adds firm guardrails to your budget

Costco does a decent job of tempting its members to overspend. The front of the store is usually stocked with discounted products, which give you good reason to buy something off your list ("but it's on sale!"). Marked-down items are also arranged near the fronts of aisles, making it easy to grab them and place them in your cart. And if you can avoid these two ploys, good luck ignoring the free samples.

If you find your own defenses useless at Costco, paying in cash could add a buffer. With no cards on hand, you'll be forced to stick to your budget. This reinforces your ability to say no to items that aren't on your list, keeping your spending in check. What's more, with credit card interest rates as high as they are, using cash could help you avoid credit card debt.

Credit card usage could mean extra rewards

If you don't overspend at Costco, using credit cards might be a better idea. It's more convenient to charge purchases to credit cards than count out your cash at the register. Besides, with the best credit cards for Costco earning 2% to 3% back, you might be leaving cash on the table without one.

Let's say you spend $3,000 per year at Costco. If you have a credit card that earns 3% back on Costco spending, you would earn $90 in rewards or cash back. That would more than pay for your Costco membership ($60). If you spent $4,000 on this same card, you would earn enough to cover an Executive membership ($120).

All in all, using cash could help you stick to your Costco budget. But you might forfeit credit card rewards and extra projections if you do. While some debit cards could earn cash back on your Costco purchases, rarely will you find one that competes with the best credit cards for Costco. Use cash to curb overspending, but if you're already frugal, using a credit card that earns more at Costco could help you cover your membership dues.