3 Reasons a Costco Executive Membership Is Overrated

An entry-level Costco membership will cost you $60 a year. An upgraded Executive membership comes at a price of $120 annually.

Paying the extra $60 can make sense, but for many people, the upgrade is not worth it. Here's why.

1. It encourages you to spend more to make your membership worth it

One of the biggest benefits of Costco's upgraded membership is that you get 2% back on Costco purchases. However, in order for those rewards to justify the cost of the membership fee, you have to spend at least $3,000 a year at Costco.

Costco's typical customer spends around $3,018 a year at the warehouse club, which is pretty close to the amount needed to cover the Executive membership fee. But you might spend a lot less than the average customer. Or you might be close to spending $3,000, but not quite there.

If you're concerned about not getting your money's worth, it's really tempting to put some extra items in your cart to get above that $3,000 threshold to break even. But that's a problem if you're making purchases you wouldn't have otherwise.

It may seem silly, but people make these kinds of financial decisions all the time because they don't like the feeling of "losing out" or "wasting money" on their Costco membership. And the 2% cash back bonus that Costco's Executive membership offers is set up to tempt you to spend more.

2. You have to be an active member to get your rewards

Unlike cash back credit cards or Sam's Club rewards, Costco pays out its membership rewards annually. The reward is issued three months before your renewal date, and you're required to be a current, paid Executive member at the end of the membership year to get the money.

This is a long time to wait for your rewards, when you could be using that bonus money to lower your costs throughout the year. If you buy a $1,000 item at the start of your membership year, you aren't getting the $20 back you just earned for nearly a year!

Plus, if you want to cancel or downgrade your membership because you decide it's not working for you, you may keep it just to not lose out on your cash back. This could mean paying extra money for a membership you no longer really want and aren't using to its best advantage.

3. Many of the perks aren't services you'll use often

Costco offers some additional perks to Executive members. But they're so lackluster, by most standards, that Costco doesn't even list them on its membership promotions page beyond saying you get "Additional benefits and discounts on many Costco services."

When you dig into the details, you learn that these extra perks include things like:

• Extra savings on bottled water delivery
• Discounts on pet insurance
• Roadside and lockout assistance -- only if you have auto insurance through Costco
• Discounted checks
• Business payment processing
• Discounted new and pre-owned vehicles

When was the last time you had bottled water delivered -- or ordered checks, for that matter? Unless you're planning on buying a car or signing up for pet or auto insurance, you probably won't benefit enough from these additional perks to justify the extra cost.

Should you sign up for the Costco Executive membership?

The bottom line is this: If you definitely 100% will spend more than $3,000 at Costco and you know you want to remain a Costco Executive member, you should sign up for the upgraded membership.

If you don't think you'll hit that spending target, aren't sure if you'll renew your membership, don't like waiting all year for rewards, and won't use the limited number of extra benefits your membership buys you, then you shouldn't bother with the extra budget hit of the Executive membership.

The good news is, there are plenty of other ways to save at Costco, even with an entry-level membership. You can buy its Kirkland Signature branded products that come at a steep discount or sign up for a credit card that gives you added bonus rewards for shopping there, like the Costco credit card. Try one of those options out rather than wasting your money on a membership that won't be worth it.