Here’s how much you’ll need to spend at Costco to make an Executive Membership worthwhile.

Some people join Costco to save on groceries and household essentials. Other people join Costco to save big on one-time purchases like laptops, furniture, and appliances.

Costco currently offers two membership levels: The basic tier costs $60 per year, and the Executive membership costs $120 per year.

At first, you might think paying double for a Costco membership is foolish. But keep in mind that with your Executive membership, you’ll get 2% cash back on Costco purchases. So, if you’ve done enough shopping, the Executive membership is for you. There’s actually a very easy way to calculate whether Costco’s Executive membership is right for you.

Would you spend more than $3,000 a year at Costco?

In general, if you spend more than $3,000 per year on Costco purchases, or expect to spend more than $3,000, you should maintain or upgrade your Executive membership. Why is $3,000 the magic number? It’s simple.

Upgrading from a basic Costco membership to an Executive membership costs $60. And $60 is 2% of $3,000. So if you spend exactly $3,000 at Costco over the course of a year, you’ll get exactly $60 back, which will pay for your Executive membership upgrade. Only then will you pay any additional costs upfront. But once you spend over $3,000, Executive membership pays off.

Of course, if you only spend $3,100 a year at Costco, the financial benefits of an Executive membership will be limited. In this case, you’ll get back $62, which means that minus the $60 upgrade cost, you’ll have a whopping $2 profit. (Of course, you could buy a hot dog and soda combo at the Costco food court for $2 and take the change home, but that’s okay.)

But let’s say you spend $4,000 a year at Costco. Your Executive membership will set you back $80, putting you ahead by $20. It might help you buy groceries for the week or it might simply give you a little extra spending money.

Consider buying larger when choosing

If you’re someone who shops at Costco every week, an Executive membership likely makes financial sense. If you visit Costco infrequently, you may need to crunch the numbers more carefully to determine whether your annual spending is likely to exceed $3,000.

But as you work out those numbers, keep larger purchases in mind as some of the items on your list may be items you can buy at Costco. For example, you might want to replace your patio furniture next year. If you buy a $1,000 set from Costco, you’re more likely to end up spending $3,000 or more.

Likewise, if you are planning a vacation, you may decide to take advantage of Costco travel packages. That could potentially push you past the $3,000 threshold.

It’s good to know how much you’ll need to spend to make an Executive membership at Costco worth it. But also, don’t put too much emphasis on the decision.

If you don’t spend enough to repay the $60 upgrade fee, you can downgrade to a basic membership and Costco will refund the difference, giving you a full $60 refund. So don’t worry too much if your initial calculations are slightly off.

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