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.
$110 to join at the executive level
$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
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.