Costco's Executive Membership Gives You Up to $1,000 in Cash Back -- but Here's Why You'll Probably Get a Lot Less

When I first joined Costco, I stuck to a basic (Gold Star) membership because I didn't shop at the store all that often and felt it didn't make sense to pay extra. But many years back, I upgraded to an Executive membership and have not regretted it since.

These days, a basic Costco membership will cost you $60, whereas you'll pay $120 for an Executive membership. But for me, the Executive membership is worth it because you get 2% cash back on your Costco purchases -- even those made online. 

Since I shop at the store on a weekly basis and normally spend at least $100 per visit, that alone gives me $100 or so back during the year, which puts my $60 upgrade fee back in my pocket -- plus at least an extra $40 to play with.

And that doesn't even account for larger Costco purchases. This year, for example, we bought a new TV, so that's an extra $30 in cash back coming my way. 

But there's a limit as to how much cash back you can get from a Costco Executive membership, and it's $1,000. Most shoppers won't come close to hitting that limit -- myself included. And that's actually a good thing.

Why $1,000 cash back is probably out of reach

To snag the maximum $1,000 back, you need to spend $50,000 at Costco in the course of a year. And, well, most of us aren't coming close to that.

Even if you do all of your grocery shopping at Costco, chances are, you're likely not spending more than $300 a week. Multiply that by 52 weeks, and your total tab is $15,600 -- nowhere close to $1,000. Even if you throw in a $6,000 vacation and $10,000 in furniture, you're still not getting $1,000 back.

But that's OK. See, as long as you expect to spend more than $3,000 a year at Costco, the Executive membership makes financial sense. Any cash back you get beyond $60 is bonus money.

Know how Costco's cash back program works

While the Executive membership often makes sense for people who shop at Costco regularly, like I do, it's important to know the details of the program to see if that upgrade pays off for you. Although most Costco purchases qualify for cash back with an Executive membership, some don't. 

These purchases don't earn cash back:

• Automobile purchases (if it weren't for this, you might easily hit that $1,000 limit)
• Eye exams
• Tire installations
• Tobacco
• Alcohol in many states
• Food court purchases (not that those $1.50 hot dog and soda combos are going to make a huge dent anyway)

It may also surprise you to learn that gasoline purchases at Costco don't qualify for 2% back with your Executive membership. However, many credit cards offer extra cash back at the pump, so if you swipe one of those, you may not miss your Costco cash so much.

All told, not getting $1,000 cash back on your Executive membership is probably a good thing, because you'd need to do a ton of spending on an annual basis to snag that maximum reward. Most of us can't afford to come close.

But remember, there are benefits to an executive membership beyond just cash back. If you buy auto insurance through Costco, you get roadside assistance and lifetime renewability included -- benefits only Executive members receive. And with homeowners insurance, Executive members get home lockout assistance and glass repair reimbursement. 

Plus, there's the Costco Connection -- a monthly magazine showcasing different products and highlighting Costco roadshow schedules. I'd never recommend getting an Executive membership for the magazine alone, but it's a small perk you might enjoy.