IT is misunderstandings like this that caused ATT to take away the ability of 3rd party retailers to use 2year contracts
Your complaint is with COSTCO. Do they offer both payment methods at COSTCO? Did you ask for Device payment plan? Or did you think you were getting some special deal and didn't read the purchase contract you signed?
If you feel overcharged, get the difference from COSTCO. It was not Verizon's fault.