Tuesday, May 4, 2021

New earn rates for the BMO CashBack World Elite Mastercard are here - earn up to 5% cash back

Early in February we brought you the news that BMO  would be revamping their BMO CashBack® World Elite®* MasterCard®* in addition to changes coming to some of their other cards. In comparison to those other card changes the changes for the CashBack World Mastercard were the only bright spot as for most people this change was truly an enhancement.

Image via BMO

Those changes to the card affect the earn rates and interest rates. Most of you will be concerned about the earn rates as the card has been an easy one in that category - a nice simple 1.5% on all purchases. BMO even advertised that fact that it is easy to understand your earn rates with no confusing category bonuses or spending caps. Well BMO has gone down the rabbit hole as the card now offers category bonuses with spending caps. Don’t let this sway way away from the card as in fact these changes are for the better for most people.  Let's take a look at new earn rates and what it could mean for you: 

- 5% cash back on grocery purchases - up to $500 per statement cycle then 1% after (effectively capped at $6,000 per year)

- 4% on ground transportation - including ride sharing, taxis and public transit up to $300 per statement cycle then 1% after  (effectively capped at $3,600 per year)

- 3% on gas and electric vehicle charging - up to $300 per statement cycle then 1% after  (effectively capped at $3,600 per year)

- 2% on recurring bill payments like your monthly phone bill or gym membership - up to $500 per statement cycle then 1% after (effectively capped at $6,000 per year)

- 1% unlimited cashback on all other purchases with no limit on how much cash back you can earn
If you add up the categories you have $19,200 in annual spending that can be bonused. This is comparable to the $20,000 with CIBC, however quite a bit less than Scotia's $50,000 (on similar categories) and TD's $45,000. If you are a really big spender those caps might a breaking point for you but for most people it shouldn't really play a big part.

 Let’s take a look and see if these new earn rates actually make the card better or worse than it is now. We’ll take our spending assumptions from our Top Cash Back Credit Card rankings as the benchmark.

Here is what the card currently earns per year not including any welcome bonuses:

$10,000 spend nets $150 cash back
$30,000 spend nets $450 cash back
$50,000 spend nets $750 cash back

And the same annual spend with the category bonuses:

$10,000 spend nets $254 cash back
$30,000 spend nets $660 cash back
$50,000 spend nets $912 cash back 

Calculation breakdown used in the spend amounts above:

- 30% Groceries
- 5% Dining
- 10% Gas
- 10% Travel
- 5% recurring bills
- 5% transit
- 35% other

Right away you can see the new earn rates are much better, in fact on the low $10,000 end of annual spend this card is actually the highest earner of the cards we compare by about $10 (based on the split above of course, it will differ for everyone)  However once you start moving up in spend at the $30,000 level it is the fourth best earner and then up at $50,000 it really starts to fall behind where its direct competitors are earning nearly $200 more per year. That's where you'll have to do the math. Take a look at your spending habits to see where you sit and compare the cards. Chances are if you are only spending $10,000 to $20,000 a year this card will be the one for you. Above that you'll have to get out the calculator and work out your spend levels and bonuses to the best cash back option for you.

Remember that BMO does let you cash out at lowest possible amount of $1 so you never have to worry about hitting a certain level of rewards or waiting until the end of the year to cash out. 

Recommended reading: Rewards Canada's Guide to Credit Card Cash Back Liquidity

No matter what these changes are we see this as a net positive for this card as it will earn more cash back now than its current 1.5% flat earn rate. The only people these changes will be a negative for are those who got this card for that non-category spending (like Costco) as most cards only offer 1% this card's additional .5% was a nice to have. So if the category bonuses don't mean much to you as you spend your money outside of those this will no longer be the ideal card for you.  In reality these changes make a lot sense given the current state of conditions. More and more people are moving to cash back cards over travel cards due to the pandemic - they don't want their rewards to be stuck in place where they can't be used or used for a long time and are willing to take a slight hit in value so they can have that easy access to cash to use for anything they want and BMO wants a bigger piece of the cash back market hence these changes.

In the end BMO has made this card much more competitive and I'll have reevaluate our Top Cash Back Card rankings to see if it will crack the top 5 or not. A quick glance right now tells me it will be just shy of doing so but if it does I'll definitely let you all know. One final thought as well, you may want to apply for the card now as it has a 10% cash back bonus on all spending up to $2,000 in the first three months and an annual fee waiver in the first year.

Learn more about and apply for the BMO CashBack World Elite Mastercard here.

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