CIBC has just announced that they have acquired the rights to be the exclusive credit card partner of Costco in Canada.
While there are many details that have yet to come to light, the card will be a Mastercard, and we can expect the transition to occur in early 2022.
What We Know About the CIBC Costco Mastercard
Once the transition is underway, existing cardholders who have the Capital One Costco Mastercard will be issued the new card from CIBC.
Costco members will be able to continue to use their credit card as their Costco membership card – an all-important benefit for those of us who have way too much plastic and metal in our wallets.
Also, as the new card will remain a Mastercard, Mastercard will remain the exclusive credit card payment network accepted at Costco in Canada. Costco shoppers will still be able to use any other lucrative Mastercard products issued by other banks, and won’t be able to use Visa or American Express cards.
Whether you’re happy to keep using Mastercard at Costco or disappointed that you can’t use other rewards cards there, the strategy will remain the same going forward.
What Else Will CIBC Do with the Costco Mastercard?
Currently, the Capital One Costco Mastercard earns rewards as follows:
- 3% cash back on restaurants
- 2% cash back on gas
- 0.5% cash back up to $3,000 spent per year on all other purchases, then 1%
At this point, we can only speculate on what the new rewards scheme might look like. There’s no word yet on what type of rewards the new card will earn, what the earn rates will be, or any new perks for cardholders.
By partnering with a big bank, I expect that Costco cardholders will benefit. CIBC has a lot more tools at their disposal than Capital One in terms of providing value in innovative and ambitious ways.
I’m interested to see if the new card will earn cash back, if it will be integrated into the CIBC Aventura program, or perhaps even a brand new Costco rewards program. Even though I see it as a secondary rewards program compared to its competitors, I’d say Aventura would be the most interesting choice, as it would enable cardholders to pool rewards with their other CIBC products.
I’d like to see the card earn a substantial return on spend at Costco. One of the glaring weaknesses of the old Capital One Costco Mastercard is that you could actually earn more rewards when shopping at Costco if you used a different Mastercard (like the MBNA Alaska or HSBC World Elite).
Surely CIBC will change this, as it doesn’t make sense to make such a large acquisition only to fail to incentivize your customers to use the new product.
We might also see a welcome bonus, which the card has been sorely missing. Or perhaps a two-tiered card, including an entry-level no-fee version and a World Elite card with more perks.
Speaking of perks, I also think there’s the potential for additional travel benefits, such as a stronger insurance package. Costco Travel is already a great way to book car rentals, and I’d love to see greater credit card integration, perhaps in the form of a travel credit.
There’s a lot of room for CIBC to get creative here. Ultimately, with CIBC taking over from Capital One, a bank that is effectively exiting Canada, they have the capacity to offer a lot more. That can only be a win for the consumer.
A Big Opportunity for CIBC
Terms of the acquisition have not been disclosed, but it’s surely a gigantic one.
CIBC is buying the entire Costco credit card portfolio from Capital One – not just rights to the brand, but also its customers. That includes over $3 billion in outstanding balances.
While debt represents risk for CIBC in case any of their customers default, it’s an enormous asset on their balance sheet (provided those debts are repaid). And while we certainly don’t recommend carrying a balance, the reality is that many consumers do. From the bank’s perspective, this is a big win.
CIBC is no stranger to the co-branded card game. As one of Aeroplan’s credit card partners in Canada, they recognize the value of a large brand and its audience. Costco is one of the largest and broadest in the country, and its store cardholders represent a huge swath of new customers for the bank.
Based on their Aeroplan welcome bonuses, it feels like CIBC is third in line, after American Express and TD. Rather than upping their game in that area and competing harder against their strong peers, CIBC is maintaining a solid supporting position in the travel rewards space, while taking their experience with co-branded partners and diversifying into the everyday rewards market.
Additionally, it’s a great chance for CIBC to cross-promote the Costco Mastercard with their Aeroplan and Aventura cards, getting Costco’s large member base interested in travel rewards (and vice versa). Perhaps a rekindling of the Aeroplan–Costco partnership is in the works, via their mutual partnerships with CIBC? We can only hope so!
CIBC is acquiring the Costco credit card partnership in Canada. Day-to-day, it might only cause small ripples in the market at first, but it’s a big opportunity for positive change for CIBC, Costco, and customers of both.
I think this partnership has tons of potential for cardholders. Costco members are always hunting for a good deal, and I’m sure there will be a lot of overlap with savvy consumers who know how to get the most out of their credit cards.
With many details yet to be confirmed, I’ll be eagerly keeping an eye on this card in early 2022. I’m hopeful that CIBC will be able to add a lot more value for its Costco cardholders than Capital One did.