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Updated October 19, 2012
A friend recently shared that he upgraded his regular $55 $50 Costco membership to the $110 $100 Executive plan, which immediately made me wonder how much money he will have to spend to make his yearly fee back. If he spends more, the upgrade was worth it. If he spends less, he should have stuck to the regular plan.
Is a Costco Executive membership worth it?
My friend makes 2% back on most purchases, including 1% back on travel purchases, 3% back on gas, and 2% back his bulk purchases. There are also membership perks for mortgages, check printing, auto financing, and one year of free roadside assistance through the auto insurance program. The rebates are valid on future Costco expenses.
Cash outlay
$110 to join at the executive level
Money back
$10 Costco gift card for signing up that my friend earned through his company (it’s not clear if this perk is widely available, but you can ask)
$9.92 Amazon selling price of Home Cooking: The Costco Way, which he received for signing up
$5 in travel rebates if my friend buys one $500 vacation package
So far my friend has – theoretically – earned $48.32 back towards his $100 membership from the above four perks. So how much does he have to spend on groceries and other items, earning him 2% back, to earn another $61.68 so he gets the full $110 back? Dusting off my algebra skills…
$61.68 – .02 cash rebate (Costco purchases needed to break even)
$61.68/.02 = Costco purchases needed to break even
$3,084 = Costco purchases needed to break even
Conclusion
My friend has to spend $3,084 on general Costco merchandise in one year to break even. That breaks down to $257 every month or $119 every two weeks, which is entirely do-able for a lot of people. If my friend bought more Costco gas, he would need to spend less in the warehouse to make his Executive Membership back. Buying glasses at Costco is one way to make your money back in one purchase.
Additionally, my calculations do not take into account any savings my friend earns on Costco’s lower prices. Costco gas, for instance, is about $.05 cheaper per gallon. I decided not to take this price differential into consideration because Costco splurges – virtually impossible for mere mortals to resist – cancel out price savings for many shoppers.
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Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price. 
I’ve had an Executive Membership for years that I split with my mother and father. It basically pays us back for the membership cost per year, so neither of us have had to pay it for nearly 10 years now.
My father used to buy his business supplies though Costco, I buy a lot of gas there, and the deals on tires are enough to make us come back every time we need new ones.
At the same time, we buy a lot of our electronics there, get our photos printed by them, and we buy their take-and-bake stuff instead of getting carryout. And we buy all our stamps there, and our prescriptions…the list goes on and on!
My mother and I recently reanalyzed our purchases there because my father’s business has closed, and we still clear the threshold in order to get our membership paid for.
It really just depends on how close the Costco is and how much you make it part of your lifestyle. Costco being up the road (within 10 minutes) from me makes it easier than if Costco was over an hour away.
The other kicker is that you need to make sure you’re not taken in by the displays and other stuff to buy things you don’t need just to kid yourself into thinking its something you need just because the discount is so awesome. My husband and I and my mother and father don’t stop at the sample booths, don’t buy from the guest displays, etc.
eta: woohoo! I’m the first commenter!
The 1%, 2% and 3% rebates you mention are from the Costco American Express, not the Costco membership, Delete those and you still only need at $50 rebate at the end of the year to break even. Remember, the regular membership costs $50. Costco also says they will reimburse you up to the upcharge for the Executive membership if you don’t qualify for the rebate on your spending alone. As an avid Costco shopper and Costco AMEX card holder, I receive close to $1,000 in rebates between the two cards yearly so I truly believe they are both worthwhile.
We’ve been executive members for three years and only one of the years paid off. But as shptilidrop points out, Costco will refund you the executive upgrade if you don’t make up your money. So if you just had a baby or are anticipating a large ticket item such as a computer or a sofa, it’s worth a try.
I shop at Costco every 2 weeks, and usually spend around $150 each time. Whatever I need, I try to buy it there. I think the lowest rebate check I’ve gotten was in the $70 range, the highest almost $100. It is well worth the $100 fee, it just about pays for itself, plus I get to shop an hour earlier!
Normal members can also get a costco amex, and the cash back is very similar — executive members get 4% instead of 3% back on gas. Executive members also get a 2% return on all their purchases at the end of the year. If you’re shopping at Costco, you should definitely get the AMEX, there is no annual fee above-and-beyond your costco membership.
He only needs to get back $50 to cover the cost difference between the regular and executive membership. $50 dollars more than he would get with the regular membership.
For this to workout, his gas spending discount (at 1%) plus his total spending rebate (at 2%) have to be > $50. So about 2500$/year to cover the $50 upgrade fee.
Speaking of $50: sign up for the costco amex now and get $50 back if you spend $500 in the first 3 months. Offer expires Aug 1. See the link at costco.com or try this one: http://www201.americanexpress.com/sbsapp/FMACServlet?request_type=alternateChannels&lpid=339&ccsgeep=37330&openeep=29367&cm_re=1-_-Right_Nav-_-Amex_BuyGas
As others have pointed out, if he’s going to be a member anyway, he only needs to spend enough to cover the incremental $50 fee to break even, so he’s only $84 away. Although I wouldn’t count the cost of the cookbook or the travel voucher if those weren’t things I was going to buy anyway.
We’re a small family so it doesn’t make sense for us to buy some of the huge food items there, but it still pays for us to have an executive membership. We usually buy gas there, often buy clothes, tires, electronics, gift cards… it all adds up!
I’m not a Costco member (gasp!) even though I have 4 kids (double gasp!)… b/c of the dreaded “extra” purchases that are so difficult to keep from buying… and the fact that I don’t like to buy my ketchup in gallon containers. I do VERY well shopping at our local markets, clipping coupons, and reading the weekly circulars to find which market has what meat/veggies/staples on sale. Costco tends to COST me more money than I’m willing to spend.
I think a shared membership is a great idea!
I’d like to add: Computers purchased at Costco have the most amazing service plan and warranty AUTOMATICALLY. 2 full years.
And the Produce??? Can’t beat the deals and the freshness/longevity.
They also carry a ton of Organic stuff for those who are purists.
Even in you’re not a member, if you’re in the market for new tech, start there and the extra $50 to join might be worth it.
@Elizabeth A two year warranty is pretty snappy. Costco often has competitive electronics prices, too. Plus, their return policy is still very generous.
well i got no so great credit so i cant get the amex but its soo worth the membership i get big packs of ground beef and hotdogs and freeze them and theres my meals for a week i think i save i get the big bottles of mayo and chicken beef glasses games phones magazines so i think its worth it
It was always worth it for me when I lived close to one. I did almost all my shopping there. I always ened up with a check back for at least $200. So it def paid for my membership and then some.
We just got our first Costco membership; it’s the regular membership, not the executive membership. When we signed up, we were given over $50 in coupons, most of which were very usable by us- a rotisserie chicken, a 2 lb. bag of coffee, etc. So, we bought a few things, and those savings, combined with the freebie coupons we were able to use, in just 2 trips we’ve already made out $50 membership fee back.
So….I could see us being able to make back the money if we upgraded to an executive membership. =)
I have been wondering if the $50 for the basic membership is worth it. I generally only buy staples (like TP and paper towels) and gifts from Costco. It would be SUCH a pain to run the math.
Since Costco is the largest retailer of fine wine, the executive membership would make sense for LA Mayor Antonio Villaraigosa.
I share a $50 membersip with a friend and we both love it.
We were told by Costco that if we do not receive at least $50 in cash back from our year of purchases, that they would cover the difference. That made it a no-brainer. And, being in marketing, I could easily see how they can make that promise and still make a LOT of $$$ while keeping that promise.
But, I’m not seeing that mentioned here. Did Costco pull a fast one on me?
We would’ve saved about $15 last year if we had an Executive membership last year, and our spending is about the same this year. We’ll see what happens.
@M. Joseph I have never heard of that Costco promise, but it is an interesting one. Did someone tell you that over the phone? I’d love to know if it is true!
Have been thinking about doing a small “buying group” w/neighbors, so that we can share the savings on staples by divvying up the too large packaging to use/store. Anyone doing something like that?
@Ellie That is a great idea! I’ve heard of friends who shop at Costco together, then split the bill and the goods in the parking lot or at home. A neighborhood buying club takes it to the next level. You’d have to find people who want to buy the same things and are flexible on brands to really make it work.
I have been basically refusing to join Costco for a few years. I have nothing against the store, but I have nowhere to put 100 rolls of toilet paper at a time and I certainly can’t eat 2 lbs of cheese before it starts to go bad. I simply don’t need it.
@Joe Don’t forget you can still use the pharmacy! And if a friend who is a member buys you a Costco Cash Card, you can use that on anything in the warehouse.
BBabe: I live in Phoenix, AZ and I needed to renew my card. I was told of the “guarantee,” their word, of the assurance of only being able to save $$ compared to the previous year.
This was explained to me face-to-face at this location: http://www.costco.com/Warehouse/WarehouseDetails.aspx?WarehouseNumber=738
I’ll try to give them a call later to confirm this.
I can see the benefit to them, if it’s true, since gaining a larger amount of revenue now turns into much more $$$ through corporate financial investments. That extra $$$ easily covers the times when a customer doesn’t quite get $50 back in cash back over the span of a year. It would be a win-win
I called Costco and found out that I was wrong about the guarantee. She said that a lot of people have perceived the Executive Membership to be as I understood it to be. They are working to clarify this.
@M. Joseph Thanks for sharing this important clarification. Hope it helps others decide whether or not to join Costco.
We have the $50 Costco membership and recently got the AmEx card. However, our rebates are 2% for travel, 3% for restaurants, and 4% for gas. Our closest Costco doesn’t sell gas, so we use our AmEx card at stand-alone gas stations. I wonder why there are such varying rebates that we have been reporting in this blog.
@Diane I believe the discrepancy in rebate percentages is between what you earn using your AmEx and what my friend earns on his Costco purchases. If you read Costco’s membership page, it says Executive Members earn 2% back on most purchases, which is what I reported. http://www.costco.com/membership/membershippopup.aspx
according to the Costco web site gas and some other purchases do not qualify for the yearly rebate so I think you need to redo your math and update this article.