The cashback from cards isn't pad by the retailers, it paid by the issuing bank and consequently by the poor sods who carry a balance at rates up to 36%. Costc

The cashback from cards isn't pad by the retailers, it paid by the issuing bank and consequently by the poor sods who carry a balance at rates up to 36%. Costco's cashback is probably some variation of the same scheme, or a similar loyalty scheme. So ultimately Costco only pays the processing fee of 0.4% or whatever.