What is the Best MasterCard for Costco Shoppers?

For Costco shoppers, you may have heard the news that Costco has replaced American Express with MasterCard and using Capital One as the issuer. The rumour is that the two large publicly traded companies, Costco ($55B market cap) and American Express ($95B market cap), could not come to terms on transactions fees. The official news is that starting January 1, 2015, American Express will no be longer be accepted in Costco stores or gas stations. From this news, it’s probably safe to assume that Costco will start accepting MasterCard on the same day. However, visiting Costco last week, it looks like they have already started to accept MasterCard (at least in St. John’s, NL)!

The Good News

As a once a week Costco shopper, the switch from American Express to MasterCard is welcomed news. I signed up for the Costco American Express card a few years back just for the fact of earning a few cash back dollars on my Costco spending. My rationale was that it was much more efficient than using my debit card and not getting any points for my spending. I’m a big believer in funneling spending through points or cash back credit cards to first obtain some rewards on spending, and second, as a budget and tracking tool.

The Costco American Express offered 1% cash back on spending greater than $3,000 (0.25% up to $1k, 0.50% up to $3k), 2% cash back on gasoline (up to $3k in spending), 3% cash back at restaurants. A decent card, except for the tiers on regular spending. The biggest pitfall however, is the lack of acceptance of American Express due to their higher merchant fees. Around here, when I ask if they accept AMEX, I get more “no” than “yes”. It’s a whole new ball game now that Costco accepts MasterCard.

The Costco MasterCard

Not only does Costco now accept any M/C, they have teamed up with Capital One to offer the “Capital One Platinum Mastercard – Exclusively for Costco Members”. Besides the benefit of only requiring one card in your wallet to shop at Costco (usually require membership card plus a payment card), they offer competitive rewards as well.

The Rewards

  • 3% cash back on restaurant purchases;
  • 2% cash back on gasoline purchases;
  • 0.50% on first $3,000 of other spending, 1% after that (implicit annual fee of $15); and,
  • No annual fee (besides annual Costco Membership).

Insurance

  • Price Protection (find a better price within 60 days, and they will refund you the difference up to $100 per item);
  • Purchase Assurance (120 days from date of purchase);
  • Extended Warranty (doubles manufacturer warranty up to two years);
  • Travel Accident Insurance;
  • Car Rental Collision/Loss Damage Waiver; and,
  • Baggage Delay Insurance.

Although the rewards are very similar to the old AMEX, the biggest benefit of this card is the general acceptance of MasterCard.  Before, AMEX holders would carry the Costco AMEX along with another credit card for other stores.  Now, Capital One Costco card holders can reduce their card count by one.  

For  a free (ish) card, I think that this credit card is very competitive in the Canadian credit card landscape, especially the insurance benefits.  The downside with this card is the 0.50% tier for the first $3,000 in spending which equates to a $15 annual fee (relative to cards that offer 1% from the first dollar spent).

However, while the rewards are good, there may be better cards out there, especially if you funnel all spending through one credit card.

Best MasterCards for Costco Shoppers

With Costco accepting M/C, regular Costco shoppers can now funnel even more of their spending on a single MasterCard.  There are a large number credit cards available to Canadians, but there are only a few that stand out from the pack.

If your monthly credit card spending is not too high and prefer to stick with no annual fee cards, then your best bet is probably either:

  • The MBNA Smart Cash Card (full review here) which will give you 1% general spending and 2% on gas/groceries up to $400/month (Costco spending does not count as groceries); or,
  • The new Costco MasterCard; or,
  • Possibly a combination of both. You can read my full comparison of free cash back cards here.

If you are a big spender ($3k+/month on a single credit card), then you may want to consider a MasterCard that has an annual fee, but with higher rewards which compensates for the fee.  Here are some examples:

  • The Capital One Travel Aspire World card (full review here).  This card will give you up to 2% cash back towards any travel (airline/hotel/cruise) and a best-in-class insurance package.  While there is an annual fee of $120 (free secondary cards), their $100 annual bonus credit for card holders reduces the net annual fee to $20.
  • The WestJet World Elite MasterCard is quite interesting as well for travelers devoted to flying with WestJet.  The annual fee is $99 for the first card, and $49 for a second card which is steep, but can pay for itself.  One of the perks that caught my attention is that card holders and their travel companions get the check baggage fee waived for their first checked bag with WestJet.  For a round trip, that’s $50 per person, so a family of 4 would save $200 per trip.  In addition, the card holder gets a $99 companion ticket annually.  In terms of rewards, this card will give you 1.5% return on regular spending and 2% return on WestJet spending.
  •  The BMO World Elite MasterCard offers 2% cash back towards any travel (airline/hotel/cruise), 4 Priority Pass lounge passes per year, and a comprehensive insurance package.  The downside is the $150 annual fee (free additional cards) and all travel needs to be booked through the BMO website (deal breaker for me).

Final Thoughts

Up until recently, I used three credit cards (see what’s in my wallet).  The MBNA smart cash for groceries, the Costco AMEX for Costco and Costco gasoline, and a grandfathered no annual fee 1.5% return Capital One card for everything else.  Now, I will get rid of the AMEX and divert the spending to my remaining two credit cards.

If I was starting over right now, I would get the free MBNA Smart Cash (for high grocery/gas bills consider the Scotia Momentum Infinite for 4% cash back on groceries/gas) for groceries in combination with the Costco MasterCard for Costco shopping, gas and restaurants.  If our monthly spending rises, I would consider the 2% return Capital One Travel card, but I’m not there yet as my existing Capital One card gives me a 1.5% return.

What are your thoughts on Costco accepting MasterCard?  What will you use as your primary MasterCard for spending at Costco?

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Stella Chan
5 years ago

I have the Capital One Aspire World Elite Mastercard and I really like it. Yes the annual fee of $120 is steep however, you get an annual bonus of 10,000 points which is $100 so it knocks the annual fee down to $20. That is awesome! My ex and I originally was going to get the Westjet M/C but because he works for Westjet, we got to fly around for dirt cheap so the Westjet M/C didn’t make sense for us. It’s not like we needed to collect points to fly for cheap. But after my ex and I broke up and I no longer have the WJ employee perks, I switched to the Capital One Aspire M/C only because as much as I love flying with Westjet, this card worked better for me as I don’t always fly with Westjet. I love flying with them however, if I find a better deal with other airlines, I’m going to go with them. With the Westjet M/C, you can only redeem points with them but what if I want to fly KLM or Quantas? I can’t redeem the points. At least with the Capital One Aspire M/C, I can redeem my points for anything (hotel, transportation, airlines) and even cash back! I did the math on it and unless you are a very loyal Westjet flyer and don’t fly with any other airline, it’s not that great of a card. Sure you get the $99 companion fee and first checked bag free but I travel super light so I always just bring a carry on. Also the annual fee is $99 vs $20 with Capital One (after the 10,000 annual bonus points). The Capital One card also has a concierge service and they take care of everything for you when you travel. I haven’t personally used it yet as I keep forgetting I have it.

The lost/stolen policy is really nice. This is something Westjet doesn’t offer. I bought a brand new cell phone for $600 and it got stolen right from my back pocket in Mexico within 3.5 months of getting it. Capital Ones policy for lost or stolen property is full replacement within 4 months as long as it was purchased with the card. I called them up to submit a claim. I forwarded them a google map of where my phone was and they reimbursed the FULL value of the phone +GST. It was nice that I wasn’t out $600.

I shop at Costco quite a bit so I was VERY happy when they switched it from AMEX to M/C.

So all in all, the Westjet card and Capital One are really good cards but at the end of the day, you have to pick one that suits YOUR lifestyle. Everyone is different.

Chuck
5 years ago

Does anyone have any experience using the Costco Capital One card for entry into a US costco?

Part of the appeal why I had the amex card was that I could thin my wallet and have the amex and costco membership cards become one card.

With costco USA coming Citi Visa, I just get a feeling that the Canadian Capitol One card may not be accepted as membership at a US location. I’ve just been carrying my old membership card again since I didn’t get the new card

Ryan
5 years ago

We were also forced to switch from AMEX to Mastercard for Costco, and it’s been a negative experience for sure.

There is no option to pay immediately online, and payments can take 4-5 days to reflect on the card.
When frequenting the US, they do not accept the Candadian Mastercard, only AMEX which we had to cancel.
There are other minor issues we never had with AMEX.

We are quite disappointed and will be cancelling it soon, so that means no rewards.

Darren
6 years ago

I was very open to this new Capital One card that Costco told me it was much better than American Express. After one month I had over $ 5000.00 of fraudulently charged charges put on my mastercard chip all within 20 min. After four months I still have not got all my money back. After calling and going to see Costco all I get is the run around saying the credit will come but I never see it.

American Express has always looked after their clients and customers same day. My advice to anybody applying for the card don’t apply.

rob G
6 years ago

I’d like to add a few remarks to this comment:

29. John
Anyone aware how the PC Financial No annual fee card compare to the Costco Master card?

OCTOBER 4TH, 2014 AT 10:40 AM
30. FrugalTrader
@John, the PC card is pretty good if you shop at Loblaws (or their affiliated stores ie. No Frills or RCSS) for your groceries. If you get the World Card, you get 2% return but only when shopping in their stores. The rewards can also only be used in their stores. Personally, I like cash back to use as I please, and/or flexible travel points.

OCTOBER 5TH, 2014 AT 2:12pm
————————————————

We have the world PC World MC and do most of shopping at Loblaw stores.
Note that you receive PC points in which my wife and I maximize to our benefit. Our superstore is always having bonus offers on PC Points and there have a few times we’ve stocked up on items because it’s been 100% return.
Therefore your return can be much more than 2% on groceries.

To get the cash back – use your points on the groceries and then bank the money you would have spent.

Hyacinthe
6 years ago

Looks like NBC is offering 5% cashback for 5 months on purchases made at participating wholesale and discount stores (incl. Costco): https://www.nbc.ca/en/personal/credit-cards/mastercard-credit-cards/promotions-and-news.html?icid=mcedition_product_mcedition_5pourcentremiseenargent_bnc-EN-personal-homepage_carrousel1_

Chris
6 years ago

But the Costco MC is only 1% on groceries (i.e. Costco itself). I use my RBC Avion Visa for everything and will just get the RBC cash back mastercard as it’s no annual fee and gets me 2% back on groceries (and I would only be using it at Costco anyways.)

tp1943
6 years ago

To the best of my knowledge only an AMEX card is accepted at US Costco stores/gas bars. I use an American address based Costco AMEX card when in the south. Sam’s Club just switched from Visa to Mastercard in the US. They will issue a Sam’s Mastercard to a Canadian address as I have one.

Ron
6 years ago

Is the chase mamzon visa card accepted at Costco in the US…thanks

Ron
6 years ago

I have been an executive member at Costco for years and it has paid for my membership so far with a little extra cash back. What am looking for is a credit card that will not charge the 2 1/2% transaction fee when shopping in the US as we purchase lots living close to the border and away south during the winter months. Can someone recommend a card.
Thanks