The Perks of Costco’s Executive Membership

By: Georgia | Published: Feb 25, 2024

One of the Costco membership options is the Executive Membership, priced at $120 annually. The Executive Membership comes with a notable perk: 2% cash back on most purchases made at Costco. 

However, prospective members must carefully consider whether the benefits align with their shopping habits to determine if the upgrade is a sensible choice.

Exploring Costco Membership Tiers

Costco provides three distinct membership levels tailored to different needs: Gold Star, Business, and Executive. 

The image captures a busy aisle inside a Costco Wholesale store. Shoppers with carts are visible in the distance near the pharmacy section. The aisle is flanked by tall shelves stocked with various products like snack mixes, nuts, and chocolates

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While Business Membership is designed specifically for business owners, individual shoppers often choose between the Gold Star and Executive tiers. The Executive tier is double the price of the Gold Star tier, which is $60 per year.


The Benefits of Costco's Executive Membership

CNET reports that Costco’s Executive Membership offers a range of benefits that extend beyond basic membership privileges. One of the primary advantages is the opportunity to receive an annual 2% reward on eligible purchases, potentially yielding up to $1,000 back each year. 

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Eligible items predominantly include grocery and household products, but it’s important to note that certain items, along with some services, do not qualify for cash back. On the other hand, specific travel purchases are included, providing added value for members who incorporate travel arrangements with their routine shopping.

Seamless Upgrade to Executive Membership

Costco facilitates a smooth transition for members wishing to upgrade from the Gold Star to Executive Membership by offering a prorated fee adjustment. This is based on the remaining months in their current membership term, as per information from CNET.

The image shows the interior of a bustling Costco Wholesale store, focusing on the self-checkout area. Customers are seen using the self-service kiosks, with some individuals scanning items while others are in the process of bagging their purchasesThe image shows the interior of a bustling Costco Wholesale store, focusing on the self-checkout area. Customers are seen using the self-service kiosks, with some individuals scanning items while others are in the process of bagging their purchases

Source: Wikimedia Commons

For instance, a member with six months until their renewal date would pay only a $30 fee to upgrade. This approach ensures members can access Executive benefits promptly without awaiting the term’s end.

Additional Membership Benefits

Beyond cash back on purchases, CNBC reports that the Executive Membership offers additional savings on various Costco services, including bottled water delivery and pet insurance.

The photograph captures an aisle within a Costco Wholesale store. Customers are seen shopping, pushing carts filled with various items. The towering storage racks are packed with bulk products, featuring an array of goods from snacks to cleaning supplies

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These benefits, along with exclusive perks on home and auto insurance, can enhance the value of the membership for those who utilize these services.

The Psychological Effect of Cash Back Rewards

However, The Ascent reports that 2% cash back reward on Costco purchases can inadvertently encourage members to spend more. The rationale behind this behavior is the anticipation of earning higher rewards, which can justify additional spending. 

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This phenomenon is akin to the behavior observed with credit card sign-up bonuses, where consumers spend more to meet the threshold for rewards.


Increased Spending: A Potential Drawback

The lure of cash back can lead to unintended purchases, with members buying items they did not initially plan to, The Ascent notes.

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When considering if the Executive Membership is worth it for you, it’s important to remember there’s a risk that the membership could lead  to unnecessary spending.


Exclusions in Cash Back Eligibility

The Ascent also highlights that not all purchases with an Executive Membership earn cash back. 

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Exclusions include gas fill-ups, cigarettes, tobacco, alcohol (depending on the state), stamps, and food court purchases. These restrictions can be significant for members who make regular purchases in these categories, expecting to receive cash back on all their spending.


The Limitation on Gas Savings

For many, the inability to earn cash back on gas purchases is a considerable drawback. Costco’s competitive gas prices are a draw for members looking to save on fuel.

A photograph of a Costco gas station on an overcast day. Several cars are lined up at the pumps, with the Costco Wholesale sign visible above the sheltering canopy

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However, The Ascent explains that Executive Membership does not apply the 2% cash back benefit to gas purchases, reducing the overall value proposition for those who frequently fill up their tanks at Costco.


The Financial Consideration of Upgrading

The decision to upgrade to an Executive Membership requires a careful assessment of one’s spending habits at Costco.

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CNBC explains that the key is whether the 2% cash back will offset the higher annual fee. Members need to spend at least $3,000 annually at Costco for the cash back to cover the cost of the upgrade, making it financially sensible.


Calculating the Break-Even Point

To determine if the Executive Membership is worth the additional cost, CNBC suggests that members calculate their annual spending at Costco. 

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If it exceeds $3,000, the membership effectively pays for itself through cash back rewards. This calculation is crucial for members to ensure they are not spending more on the membership fee than they are receiving in benefits.


The Option to Reevaluate Membership Value

CNBC reveals that Costco allows members to downgrade their membership and receive a refund of the difference if the Executive Membership does not meet their expectations. 

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This policy provides a safety net for members to try the Executive level without long-term financial commitment.