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Years ago, I was checking out at Costco when I was asked if I wanted to upgrade my basic membership to an Executive one. Since I was starting to shop at Costco more frequently, I decided to take the plunge. And it’s since paid off big time. Last year, I earned more than $100 in cash back on my Costco membership without making any especially large purchases.

How the Costco Executive membership works

An Executive membership at Costco costs more than a basic one. Right now, you’ll pay $120 for the former and just $60 for the latter. Despite that higher cost, the Executive membership is pretty popular. As of the end of Costco’s last fiscal quarter, the company had 32.3 million Executive members.

The primary benefit of the Executive membership is earning 2% back on your Costco purchases. Those include online purchases and travel packages you book.

It takes just over $3,000 in annual Costco spending for an Executive membership to make financial sense. That’s because you’re spending an extra $60 on that membership, and 2% of $3,000 is $60. So to put it another way, $3,000 is your break-even point, and if you spend a bit more, you’re going to come out ahead financially with an Executive membership.

How I snagged more than $100 back from Costco

In the past, I’ve made my share of larger purchases from Costco — things like laptops and TVs. But these aren’t items I buy regularly. If anything, they’re things I buy every few years.

In fact, last year, I didn’t make any particularly large purchases at Costco. But even so, I managed to snag more than $100 back on my Executive membership by simply shopping at the store weekly and spending about $100 to $150 per trip.

While some people only go to Costco on occasion to stock up on certain bulk items, I shop there weekly. Costco is my go-to source for things like milk and dairy products, sandwich meat, produce, and snacks (which my kids tend to consume a lot of). And a lot of my Costco shopping replaces regular supermarket shopping, only at a lower cost.

So, assuming I go to Costco 50 weeks out of the year and spend $100 each time, that’s $5,000 in spending, and 2% of that is $100. Because my weekly haul sometimes exceeds $100, it’s easy to see why my annual reward last year was a little more than $100.

Does an Executive membership make sense for you?

If you consider yourself an occasional Costco shopper, then a basic membership might make the most sense. But if you tend to shop at Costco on a regular basis, then chances are, you’ll come out ahead financially with an Executive membership.

Don’t just guess at a decision, though. Go to customer service at Costco and ask to see what your total spending amounted to over the past 12 months. That’s information a customer service representative can access by pulling up your account.

If that total is over $3,000, it pays to get the upgraded membership. If that total is less, stick with a basic membership unless you expect to start spending more at Costco in the coming year for a specific reason. And if you’re right on the cusp, you may want to take a chance on the Executive membership — especially since Costco will let you downgrade at any time and refund you the difference if you don’t earn enough cash back to make up your $60 upgrade fee.

When I upgraded to my Executive membership at Costco, I was hesitant at first. I now see that move was a no-brainer for my personal finances. Run the numbers to see if you’re in a similar boat and can benefit from an upgraded membership like I do.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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