Full Review on the new CIBC Costco Mastercard

The Costco Canada Mastercard was previously issued by Capital One, but as of 2022, it is now being issued by CIBC. This marks CIBC’s first Mastercard, as the bank had previously partnered with Visa on their credit card lines.

With more than 10 million Costco memberships across Canada, CIBC acquired the pre-existing Costco credit accounts to introduce the CIBC line of financial products to potential new customers.

The CIBC Costco Mastercard rewards program provides unlimited cash back on eligible purchases, with the earn rate varying based on the category of purchase. Cardholders receive a cash back gift certificate in January for the previous year’s earned cash back, which can be redeemed at Costco warehouses for almost anything. The gift certificate can be viewed and printed through online banking or the mobile app, or presented in-person at a Canadian Costco warehouse. But, the gift certificate can only be used in-stores and cannot be redeemed online.

Unlike many other partnered credit cards, the Mastercard does not offer a special return rate for shopping in-person at a Costco location. However, cardholders earn a higher return rate for shopping online at Costco.ca or at a Costco gas station.

The Costco Canada CIBC Mastercard has a $0 annual fee, although you need a Costco membership to be eligible for the card. Costco Canada memberships range from $60 annually for their Gold Star card to $120 for the Executive membership, which offers 2% cash back on purchases and other exclusive deals.

The Costco Canada CIBC Mastercard card has a 19.75% interest rate for purchases and a 21.49% rate for cash advances.

The new CIBC Costco Canada Mastercard will be the only Costco Canada branded credit card offered for new memberships. As of March 4, 2022, all Costco Canada Capitol One Mastercard accounts were automatically transferred to a CIBC Costco Canada Mastercard.

Customers will still receive the same benefits as they did with the previous Capitol One Mastercard. CIBC is also offering a $20 bonus for all Costco Canada credit card holders to make up for the inconvenience of the switch. To qualify for the $20 credit, before December 31, 2022, you must:

1. Make a purchase with your new CIBC Costco Canada Mastercard
2. Sign up for the CIBC Mobile Banking app or on the CIBC Online Banking website

Note that this $20 credit is only available to those customers who previously had the Capital One Costco Canada card, to make up for the switch of providers.

Buying in bulk has become synonymous with Costco, the membership-only warehouse chain that allows shoppers to buy items in larger quantities or sizes than traditional retail stores. With its gigantic locations that sell everything from groceries to high-end electronics (along with an eyewear department and a pharmacy), Costco has become a one-stop shop for many Canadians.

While Costco is renowned for its convenience (and ridiculously cheap hot dogs), it is rather restrictive in one area – accepted payment methods. Costco Canada only accepts Mastercard for credit card payments (along with debit, cash, or gift cards). Given that a typical Costco order can run quite high (especially for those shopping for large families), many customers likely prefer to pay using a credit card, which in this case, limits them to using Mastercard only.

Many consumers may not realize that every credit card transaction costs the seller a fee, known as an interchange fee. Interchange fees can range from 2-3%, depending on the card used. That 2-3% can quickly cut into a company’s bottom line, which is why Costco has carefully selected the credit card companies they will accept in their stores.

For many years, Costco Canada partnered with American Express. The exclusive deal meant that Costco would only accept American Express cards, and in return, the company would charge Costco a lower interchange fee.

That deal eventually fell through when Costco tried to secure an even lower interchange fee from American Express. Costco Canada then switched to Mastercard in 2014, which is the only current credit card accepted at Costco locations.

In theory, securing an exclusive Mastercard deal allows Costco to pass on savings to their customers, but it prohibits shoppers from using the card of their choice, including Visa and American Express cards.

While you can’t use your Visa card to pay for in-store purchases at Costco Canada, you can use your Visa card to pay for online orders via the Costco.ca website. Like a traditional Costco Canada warehouse location, the Costco website features a wide range of products, though pricing and delivery options for certain items may be limited. 

The Costco Canada CIBC Mastercard also serves as your Costco membership card, saving you a bit of room in your wallet or purse.

The cashback card offers customers up to 3% in savings, 1% on all purchases, including items at Costco, 2% cash back on gas purchases and Costco.ca orders, and 3% back on Costco gas and restaurant purchases.

The 1% cash back on all purchases is an improvement over the previous Capital One card, which offered 0.5% back on your first $3000 in purchases, and 1% from that point on.

Costco Canada’s cashback program is calculated once a year, two months before your annual Costco membership expires. The coupon acts like a gift certificate and can be used for most purchases at any in-store Costco location. Cashback certificates cannot be used to purchase alcohol, tobacco-related products, gas, pharmacy, or optical care items.

Each customer may earn up to $1000 of cash back per year.

If you don’t have a credit card or don’t want to use a Mastercard for your Costco Canada in-store purchases, you can pay via cash, debit card, or gift card. However, if you are looking to maximize your Costco Canada cashback savings at the end of the year, the Costco Canada Mastercard is your best bet.

Switching the credit card provider for millions of loyal customers was a big risk, but the switch appears to have been successful for Costco Canada. While the switch is still recent, Costco Canada and CIBC have made the transition as seamless as possible for Costco Canada members.

Apart from the inconvenience of changing one’s online banking information, the switch has no real downside for Costco Canada members. The benefits remain the same as they were with the Capital One card, and there have even been some welcome upgrades, including the ability to start earning 1% back on purchases from the first $1 spent, instead of the .05% interest earned for the first $3000 of purchases under Capital One.

For avid Costco Canada clients, the new CIBC Mastercard is a recommended way to maximize your annual cash-back savings. With a $0 annual rate, there is no disadvantage to the Costco Canada CIBC Mastercard as long as you clear your balance every month by the due date to avoid the 19.75% interest rate.

If you want to avoid the chance of paying interest fees, you can always use cash or a debit card to pay for your Costco Canada in-store purchases. If you have an Executive Costco card, you will earn 2% cash back on most in-store and online purchases even if you pay via Interac or cash.

The Costco Canada CIBC Mastercard also allows you to earn 1% on all purchases (whether at Costco or not), as well as 2% at outside gas stations and Costco.ca orders, and 3% back on Costco gas and restaurants.

As long as you are diligent about paying off your balance each month, the Costco Canada CIBC Mastercard is a great way to rack up cashback credits throughout the year that will pay off when your annual totals are calculated and your Costco Canada cash back check is issued.

While most Costco Canada shoppers would likely prefer to have more choices at the cash register (the inability to pay by Visa in-store is still a huge hurdle for many customers), the company’s switch from Capital One to CIBC for their Mastercard clients appears to have been handled as well as could be.

Despite some minor administrative headaches (including the need to register for a CIBC account for those who didn’t previously have one), the new CIBC card maintains all of the previous account benefits from the Capitol One card while improving in certain areas.

For new customers along with previous Capitol One Costco Canada accounts, the new CIBC Costco Canada Mastercard is a recommended way to start earning your year-end Costco Canada cashback funds by shopping the same way you always have (albeit with a shiny new card).