We switched to a Costco membership (from Sam's) three years ago and like all new members, were solicited for the upgraded Executive level of membership (2% rebate on Costco purchases for an additional $50 over and above the base $50 annual membership fee) and the Costco Cash Rebate Am Ex card.

We do not like adding credit cards to our personal portfolio, but since Costco only accepts Am Ex (and we didn't carry an Am Ex card at the time), we were left with little choice, since we don't pay cash for any purchase over $20.

The Up Side

Unlike most Am Ex cards, the Costco Am Ex card is fee-free. There's no annual fee for the card, over and above the Costco Executive membership fee ($100).

If you use credit cards for a lot of your purchases, you can realize some substantial cash rebates for the use of the card. Last year our cash rebate on the Am Ex card amounted to over $325. When the Costco purchase rebate for Executive membership is added ($135+ last year), the net savings to us after deducting the $100 Costco Executive membership fee amounted to about $360.

If you carry a balance on the card, you get a 0.5% higher cash back bonus, offsetting a small portion of your interest expense.

The Costco Am Ex serves as your membership card for the Costco store, eliminating one more card from your wallet, a small but meaningful convenience. A photo ID on the reverse side of the card enhances security.

We've found the Am Ex card member web site to be very comprehensive and convenient. We access our monthly statement and pay the bill on line with ease and reliability.

The Am Ex web site provides a seamless interface with Quicken personal finance software for downloading transaction details. The same service is available for MS Money users, although I've not tested that version.

Am Ex customer service has been responsive and helpful on the few occasions that some assistance has been necessary.

The Down Side

The cash rebate is not particularly generous, until you reach $5000 in annual spending. The first $2000 in purchases gets you a miserly 0.25%, the next $3000 0.5%. Anything over $5000 in purchases produces 1.5% cash back. Not bad, but there are rebate cards out there that give better cash back deals.

If you carry balances on your card, the interest rates aren't the best that can be had, especially if you have good credit history/rating. We pay the balance in full monthly, but if we didn't, the APR on purchases is 16.24% currently. The rate on cash advances is a near-usurious 22.74%. This is a credit card, not a bank loan window.

Am Ex cards are not as widely accepted as are Visa and MasterCard. It's not as though your could either cut up or not carry a second credit card. An Am Ex card alone simply won't cut it.

The Bottom Line

All things considered, the Costco Am Ex cash rebate card isn't a bad deal. It gives you "one card" access to Costco for entry and purchases. If you aren't prone to run up credit card balances, there's no additional cost for the card, if you choose the Executive membership at Costco. You can wind up with some extra cash back if you do charge a substantial sum in purchases on the card. Since Am Ex is the only credit card accepted in the Costco stores, it represents a reasonable choice for Costco members, especially if you wouldn't otherwise carry an Am Ex card.

Properly managed, the Costco Am Ex cash rebate card has some substantial benefits, with a limited down side.

Update

FYI, I was doing some shopping at Costco on-line, and it now appears that Costco is offering an Am Ex "True Rewards" card, rather than the cash back card reviewed above. Although details were limited, the "new" card being offered provides a flat 1% cash back bonus, plus additional cash back bonuses for dining and travel purchases on the card.

From Costco's web site:

"True cash back- 3% for eating out, 2% for traveling, 1% everywhere else, including at Costco."

Recommended: Yes