More than half of Costco members pay for an executive membership. Should you join?

Costco recently made headlines when it announced it was raising its membership fees for the first time since 2017. The standard Gold Star membership will go up by $5 to $65 per year, while the top-tier Executive membership will now cost $10 more per year, at $130. These changes will take effect on September 1.

In addition to the price increase, Costco also made another interesting point about its membership program: Of the 52 million Costco members in the U.S. and Canada affected by the price increase, More than half There is an executive membership.

Why do so many people pay twice as much for membership?

Costco Executive membership costs exactly twice as much as the basic membership tier, which gives members full access to shop at the retailer’s warehouse club stores. That raises the question of why more than 26 million people are willing to pay a much higher annual fee.

Executive members get a number of perks that aren’t available to the basic tier, but the most important one is (by far) 2% back on most Costco purchases in the form of an annual rewards certificate. In other words, for every $1,000 you spend on eligible purchases at Costco during your membership year, you’ll get $20 back to use at Costco. And keep in mind that this 2% is in addition to any credit card rewards you earn on your spending.

Not all purchases are eligible. Common examples of excluded purchases include gas, cigarettes, gift cards, and food court purchases. Alcohol and prescriptions are also not counted in some states.

Of course, there are other perks to Executive membership. Executive members typically receive additional benefits, such as resort credits when booking vacations through Costco Travel. And there are often additional perks and discounts on things like car service and insurance purchased through Costco. But for most people, the 2% rewards are a big motivator to earn the higher tier membership.

Is a Costco Executive Membership Worth the Cost? for you?

Want to do some math? (Don’t worry. ~ too A lot). The cost difference between a Costco membership and an Executive membership is $65. So for the upgrade to be worth it, the rewards you earn during your membership year must be worth more than that difference.

Dividing $65 by 2%, we see that the amount of money you need to spend at Costco to earn $65 in annual rewards is $3,250. That’s the amount you need to spend to break even on the Executive membership. If you spend more, the Executive membership could be an easy decision.

To put that into perspective, $3,250 in annual spending comes to about $271 per month in qualifying purchases at Costco. The average family with children spends $331. In a week Since it’s only used for groceries, according to the Census Bureau, it’s not hard for many members to reach this monthly spending limit even if they only do some of their grocery shopping at Costco.

As a personal example, my wife and I spend about $600 a month at Costco on average. We buy groceries that make sense to buy in bulk (I’m a family of four) and sometimes other items like clothes, batteries, and even furniture. That translates to about $7,200 a year, and 2% of that translates to about $144 in rewards each year. Last year, our Costco rewards were just over $150.

conclusion

It may seem surprising at first that more than half of Costco’s membership base chooses a plan that costs twice as much, but the numbers make sense. With a robust rewards program and manageable spending limits, Executive Membership is worth the higher price, so it’s not hard to see how paying extra for membership makes sense for tens of millions of people.

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