Costco's Executive Membership Is Free if You Do This

Costco has two membership tiers to choose from: The Gold Star membership is its entry-level option. It costs $60 per year. The Executive Membership is the upgraded membership, and it costs $120.

While the Costco Executive membership appears at first glance to be the more expensive option, it is essentially free for many members. Here's how the upgrade could end up costing many members nothing at all.

If you do this, Costco's executive membership is effectively free

While Costco's Executive membership costs an extra $60 per year, it can end up costing nothing in the end because of one of the key perks that it offers. That perk is 2% back on most Costco purchases except for things like gas, Costco shop cards, stamps, cigarettes, and alcohol (in some states).

The maximum 2% cash back award is $1,000, which is more than many people end up earning through the program. However, if you spend a total of $3,000 per year on eligible Costco purchases, then your 2% rewards will equal $60 for the year.

Better yet, when you spend more than $3,000 at Costco, you'll basically get paid for upgrading to the Executive Membership. If you spend $4,000, for example, you'll get $80 back in your annual rewards.

Will you be able to cover the cost of your Executive membership?

So, will you get a free Executive membership?

For most people, it's pretty easy to do. The 2% back counts purchases at Costco travel, so a single trip might give you enough cash back to cover the membership upgrade.

Other big-ticket items can also get you a long way toward making back your upgrade fee. And Costco has some great perks for those who buy things like electronics or appliances at the warehouse club, including extending the manufacturer's warranty on most items for two years, offering a 90-day return window, and providing free technical and warranty assistance services for these items.

If you're in the market for these items and considering buying at Costco, signing up for the Executive Membership first makes good sense.

Of course, you don't have to spend your $3,000 all at once either. If you spend just $250 a month on anything at Costco warehouse clubs -- from food to paper towels to pet products -- then your upgraded membership will basically be free as well.

You can get an idea of your past Costco spending by checking your credit card statements to see how much you usually buy there. You can also think ahead to any big purchases, like appliances, that might put you over the $3,000 spending threshold.

If it seems likely you'll be able to break even for your Executive membership, then signing up for it is really an easy decision.