If you're looking to join Costco, you could get away with spending as little as $60 a year on a basic membership. But if you plan to shop there fairly often, it could pay to upgrade to an executive membership.
An executive membership at Costco costs $120 a year. But in exchange, you get 2% cash back on Costco purchases, including orders you place online.
It takes $3,000 in annual Costco spending to break even on the executive membership -- meaning, to make back the $60 extra you're paying for it. So that's a number you should keep in mind if you're not sure which membership to get.
That said, there are certain Costco purchases that do not qualify for cash back with an executive membership. Here are some you should know about.
1. Cigarette and tobacco purchases
You may be able to purchase cigarette and tobacco products at your local Costco. But those items won't be eligible for cash back if you have an executive membership. If you're counting on your weekly cigarette purchase to get you beyond that $3,000 break-even point, you may want to reconsider the upgraded membership.
2. Gas
Members commonly like to fill up their cars at Costco because the warehouse club giant is known to offer competitive prices on gas. But your fill-up won't result in cash back on your executive membership. That said, the credit card you use might give you cash back, so your personal finances won't totally lose out..
3. Costco Shop Cards
Costco's Shop Card is the equivalent of a store gift card. The nice thing about Shop Cards is that if you gift one to someone who isn't a Costco member, they'll be allowed in to shop by virtue of having that card, even if they don't have a membership card to flash at the door. But you should also know that buying Costco Shop Cards won't result in earning cash back on your executive membership.
4. Stamps
It could pay to load up on stamps the next time you visit Costco. But unfortunately, you won't get cash back with your executive membership on that purchase. You might also end up with a really large quantity of stamps if you buy yours at Costco, so you'll need to be careful. Over time, the adhesive on stamps can become less sticky, so if you do most of your bill-paying online, you may be better off buying a smaller quantity of stamps at your local supermarket or post office instead.
5. Food court purchases
There's nothing like a stop at the Costco food court to fill an empty stomach on the cheap. But you should know that your budget meal of frozen yogurt or pizza won't give you cash back toward your executive membership. However, considering that you might spend a mere $1.50 for a hot dog and soda combo, not getting your 2% back means missing out on a whopping $0.03.
6. Vehicle purchases
The maximum cash back you can rack up per year with an executive membership is $1,000. To hit that max, you'd need to spend $50,000 at Costco over the course of 12 months. But that may be doable if you're buying a car through Costco's auto program. However, here's some bad news: Car purchases don't qualify for cash back with an executive membership. So if you're hoping to snag that $1,000, you might really need to buy a lot of cereal and toilet paper.
An executive membership at Costco can be very worthwhile despite not earning cash back on the items above. And remember, if you're not sure whether the upgrade is right for you, you may want to just take the chance. Costco will allow you to downgrade your membership after a year if you find that it's not worth it, and you'll also be refunded whatever portion of your upgrade fee you don't make back in cash back form.
So if your executive membership only gives you $40 back after a year, you can downgrade to a basic membership and get reimbursed $20. Given that lack of risk, it may be worth giving an executive membership a shot.
