Costco Offers Members a Whole New Way to Pay

Costco does not do business like every other retailer.

Instead of taking every method of payment possible, it limits itself to cash and one credit card partner. That allows it to make the best deal possible with the credit card company.

That's why the company used to work only with American Express and now has an exclusive co-brand with Citi and Visa. By partnering with a sole provider, Costco entices members to get that card.

Visa and Citigroup like that arrangement because it drives customers to them, and they sweeten the deal by adding perks like cash back and gas discounts. It's a partnership that was in doubt earlier this year, but the two sides have signed a three-year extension.

That means the vast majority of Costco purchases will involve cash, debit cards, or the Citi Visa. The warehouse club, however, has added one new way to pay for purchases — specifically big-ticket purchases — that members have embraced.

In addition to its staple items, Costco also sells furniture, appliances, and other big-ticket items.

Image source: Brown/AFP via Getty Images

Costco adds pay-over-time partner

Costco now works with Affirm and offers this option on some items at online checkout. Affirm provides third-party buy now, pay later services.

“With Affirm, you can buy now and pay later at your favorite brands. We never charge hidden fees or compound interest. Just take us wherever you want to shop for the best way to pay for the things you need,” the company shared on its website.

In most case, you do pay interest, but the company shows you exactly how much each plan will cost. Pay faster and the added (not hidden) fees will be lower.

The company also noted that it uses simple, not compound interest.

“If there's interest on your purchases, it's simple interest and not compound interest. That matters because the amount never changes and never grows, unlike compound interest which increases over the length of your loan,” the company added.

Costco embraces Affirm based on member feedback

Costco CFO Gary Millerchip talked about the Affirm partnership during Costco's third-quarter earnings call.

“Affirm has a white label product, if you like, where it's offering service to members. There were some Costco members that were already using Affirm as a solution for a part of purchasing certain products at Costco, while not coming through our ecosystem and not getting the full value from Costco with the exclusive pricing that we can offer to members on the Affirm product when it's through our website and through our digital solutions.”

Members have embraced the change.

“And as we looked at the growth that we're seeing, which has been very strong in many of those big and bulky and large purchase items, we recognize there are some members that want to be able to structure those payments over a period of time,” Millerchip shared.

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He feels that working with Affirm benefits members and supports the Costco brand.

“And we believe it's an opportunity for us to be able to deliver more value for the member by having exclusive pricing there while also giving them more options in the way in which they can buy the product.”

Costco's Affirm deal at a glance

BNPL Option: Members can split online purchases into monthly payments.
Purchase Range: $500–$17,500.
Terms: 3-36 months, APR 10% to 36%.
No Hidden Fees: Transparent pricing; no late fees.
Credit Check: Instant approval, soft inquiry only.
Availability: Costco.com only (not in warehouses).
Multi-Year Partnership: Aimed at boosting digital sales and loyalty.

Costco also offers a buy now, pay later option called Flex Pay through Citibank. That service is limited to Costco Anywhere Visa Card members.

“By offering more payment flexibility for items members may genuinely need — like appliance upgrades or seasonal purchases — Costco strikes that balance of supporting business growth while demonstrating understanding of the economic pressures many households currently face,” Money Talks News wrote.

Analysts see the deal as a strong one for Affirm as well.

“J.P. Morgan analysts describe Affirm as well-positioned for continued growth, citing its three consecutive quarters of accelerating gross merchandise value (GMV). They specifically highlighted the Costco partnership as one of the key developments strengthening Affirm’s outlook,” Barron's reported.