Capital One Costco Mastercard alternatives: The 4 best Costco credit cards in Canada

by Jordan Lavin May 15, 2020 / No Comments

For many Canadian families, a Costco membership is practically essential. I can still remember my parents making their semi-annual pilgrimage to the nearest Costco, some 500 kilometres from our home in northern British Columbia, returning with a minivan packed to the rafters with groceries.

Now I have a family and Costco membership of my own. Every so often I go through the checkout, I get pitched that I really should be using the Capital One Costco Mastercard. But does the home of the best chocolate cake disguised as a muffin also have the best credit card offer? Or are there sweeter alternatives to be had?

Let’s explore.

Ratehub’s best credit cards for Costco

Credit Card Annual Fee Rewards at Costco
MBNA Rewards World Elite (VIEW DETAILS) $120 2 points per $1
BMO World Elite (VIEW DETAILS) $150 (waived 1st year) 2 points per $1
Rogers World Elite (VIEW DETAILS) $0 1.5% cash back
MBNA Rewards Platinum Plus (VIEW DETAILS) $0 1 point per $1

Costco credit card facts

Before we jump too far ahead, it’s important we first shed light on a few facts.

1. Costco only accepts Mastercard

If you’re looking for a credit card specifically to use for shopping at Costco, know your options are limited. Like many discount retailers with its size and power, Costco only accepts credit cards with the Mastercard badge. That immediately excludes some of the best credit cards in Canada that happen to be issued by American Express or Visa, like the American Express Cobalt or the TD CashBack Visa Infinite.

2. Costco isn’t considered a grocery store by credit cards

Costco isn’t classified as a grocery store according to Mastercard’s merchant code system. That means you won’t earn any additional points or cash back when using your card at Costco, even if your card has groceries as a bonus category. In short: if you carry a Mastercard that offers 2% cash back on groceries and 1% on everything else, you’d net just 1% at Costco.

3. Costco’s pitch: the Capital One Costco Mastercard

The credit card Costco would prefer you to use is the Capital One Costco Mastercard.

The card does have its benefits, including the fact it has no annual fee and doubles as your Costco membership card (which means you’ll have one less card to carry around in your wallet).

However, the Capital One Costco Mastercard has one glaring drawback: it offers less than stellar rewards on most everyday purchases, including on your spending at Costco (just 0.5% cash back on your first $3,000 in purchases and 1% after that).

In sharp contrast to most store credit cards (think PC Financial or Canadian Tire’s Mastercard) the Capital One Costco Mastercard doesn’t offer bonus rewards from its affiliated retailer – so you’ll get no more than 1% cash back on your Costco purchases.

Capital One Costco Mastercard

The Pros

  • You’ll earn 3% on dining and 2% on gas.
  • The Capital One Costco Mastercard doubles as your Costco membership card (though you’ll still need to pay the membership fee).
  • While many of its insurance benefits are pretty standard for a credit card (e.g. purchase protection) it does feature some nice to haves for a no fee card like rental car coverage and baggage delay insurance.

The Cons

  • You’ll earn no more than 1% cash back at Costco, which means it’s not the best card to use at the warehouse retailer.
  • On most of your everyday purchases – other than gas and dining – you’ll earn just 0.5% cash back on your initial $3,000 in annual purchases and 1% thereafter.
  • You’ll have to wait for the start of the calendar year for your cash back rewards since it’s sent via mail every January. Plus, it comes in the form of a cash coupon that can only be redeemed at Costco.
  • You must be a Costco member in order to receive the card.

If you’re wondering whether you can do better than 1% cash back when shopping at Costco, your hunch is correct. Below are some of our favourite alternatives to consider for converting your bulk purchases into bulk rewards, many of which made our list of the best Mastercards in Canada:

Best credit cards for Costco shoppers

MBNA Rewards World Elite

  • $120 annual fee
  • Earn 2 MBNA points per dollar on all purchases
  • Receive up to 30,000 bonus points
  • Income requirement: $80,000

The MBNA Rewards World Elite Mastercard is a great option for Costco shoppers.

It rewards you with 2 points per dollar across all categories, including on purchases at Costco. 2 MBNA points equal to $0.02 when redeemed for travel rewards, so you’ll essentially pocket 2% at Costco – which is over double the earn rate of the Capital One Costco Mastercard.

You can also redeem MBNA points for a huge variety of gift cards (from Amazon, Rakuten, Hudson’s Bay, and more) at a rate of around 2 points for $0.018 – or 1.8% back per dollar spent. That’s solid value on gift card redemptions rarely offered by most travel cards and well above what you’d earn with Costco’s own co-branded credit card.

The MBNA Rewards World Elite comes with an impressive welcome offer of 30,000 points (up to $300 value) that you’ll get for enrolling for e-statements and making at least $2,000 in purchase on the card within the first 90 days of signing up. While the card does have a $120 annual fee, it doesn’t cost anything to add authorized users, so you and your partner or a fellow family member can both rack up points with this card together at no extra cost.

BMO World Elite Mastercard

  • $150 annual fee (waived for the first year)
  • Earn 3 BMO Rewards points per dollar on travel, dining and entertainment purchases; 2 points per dollar on everything else
  • Earn 30,000 bonus points (value: $210) when you spend $3,000 in the first 3 months
  • Get an additional 10,000 bonus points (value: $70) after your first year of membership
  • VIP lounge access with the included Mastercard Airport Experiences membership, plus 4 complimentary passes per year
  • Income requirment: $80,000

One of the best travel credit cards in Canada, the BMO World Elite Mastercard rewards you with 3 points per dollar spent on travel, restaurants, and entertainment, while paying 2 points per dollar on all other purchases (including at Costco).

Since 1 BMO point equals to 0.67% when redeemed for travel, that works out to a return of 1.34% on Costco purchases – which comes out well ahead of the Capital One Costco Mastercard.

This card also has some of the best perks available including top-notch travel insurance benefits, complimentary access to airport lounges, and a welcome bonus valued at up to $240. The card’s $150 annual fee is also waived for the first year.

Rogers World Elite

The no fee Rogers World Elite Mastercard currently offers 1.75% cash back (as of when this blog was last updated) at Costco and on most everyday purchases – outearning Costco’s own co-branded credit card – though the Rogers Card does come with a higher annual income requirement of $80,000.

But take all the above with a grain of salt because the Rogers World Elite is facing a major overhaul on June 2, 2020 that’ll introduce a slightly lower earn rate and some new quirks.

For one, the card’s cash back rate will drop from 1.75% to 1.5% cash back (including at Costco). Secondly, you’ll soon have to meet a minimum spending threshold and will be required to make at least $15,000 in purchases on the card every year just to be considered eligible to keep it. If you don’t hit that $15,000 mark every year (or an average of $1,250 in spending every month), you’ll be downgraded to the entry-level Rogers Platinum Mastercard, which also has no annual fee but earns a less impressive 1% cash back. It’s an odd stipulation and means the card is really only a good fit if you plan to use it almost exclusively for most of your everyday purchases. Overall, the Rogers World Elite is still one of the best to use at Costco but these upcoming changes add some inconveniences, dropping it a few spots down this list.

MBNA Rewards Platinum Plus Mastercard

  • No annual fee
  • Earn 4 points per $1 spent on eligible gas, groceries and restaurant purchases during the first 90 days
  • After 90 days, get 2 points‡ per $1 on eligible gas, groceries and restaurant purchases ($5,000 annual cap on each category).
  • 1 point‡ for every $1 spent on all other eligible purchases
  • Income requirement: None

The MBNA Rewards Platinum Plus has no annual fee and no minimum income requirement, immediately making it one of the most accessible options on this list. Cardholders earn 2 points per dollar spent on gas, groceries, and restaurants, and 1 point per dollar on all other purchases (including at Costco). For context: 1 MBNA point equals 1% when redeemed for travel or around 0.9% when redeemed for gift cards.

Yes, the card’s rewards scheme offers a standard 1 point per dollar at Costco, but it still outearns the Capital One Costco Mastercard (which starts offering rewards at just 0.5% cash back). The MBNA Rewards Platinum Plus also has groceries as a bonus category, making it a solid option to use for shopping runs at full-fledged grocery stores like No Frills or Loblaws, and overall, a great all-around alternative to the Capital One Costco Mastercard.

Honourable mention

MBNA True Line® Mastercard®

  • No annual fee
  • Standard annual interest rate of 12.99% on purchases and balance transfers; 24.99% on cash advances
  • Around the clock protection against fraudulent charges
  • Note: This offer is not available for residents of Quebec

Compared to the other cards we’ve covered, the MBNA True Line is what you’d consider a black sheep since it’s a low interest credit card and doesn’t offer any rewards. Nonetheless, it holds a spot on our list for one simple reason: if you regularly carry a balance on your credit card from one month to the next, this card will help you save.

That’s because it’s got an annual interest rate of just 12.99% – which is considerably lower than the standard of 19% found on most cards, including the Capital One Costco Mastercard.

Simply put, if you don’t quite manage to pay off your credit card statement in full every month but rely on credit when shopping at Costco, the MBNA True Line will help you come out ahead (even without the benefit of earning rewards) since you’ll owe so much less in interest. The fact it’s got no annual fee means it’s quite accessible too.

Stock up on groceries – and credit card rewards

The crux of the problem with the Capital One Costco Mastercard is this: why would you sign up for a credit card that primarily rewards restaurant purchases if you’re shopping at Costco, presumably to stock up on merchandise and food for consuming at home? If you’re a casual Costco shopper who goes to a lot of restaurants, it could be an option worth considering. But if you want more rewards for your cart-filling grocery shopping trips, choose one of the Costco credit card alternatives above, and watch your rewards (or savings) pile up.

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categories: Credit Cards