You Might Want to Upgrade to the Costco Executive Membership. Here's Why

Costco offers two levels of membership to its warehouse clubs. The basic membership costs $60 per year, while the upgraded version -- known as the Costco Executive membership -- costs exactly twice as much, or $120 per year.

Not surprisingly, many Costco shoppers opt for the lower-priced membership. After all, the whole point of going to Costco is to save money, and many people approach the membership itself with that in mind.

However, it's important to know that just because something has a higher price tag doesn't necessarily mean that it's expensive, and that's the case here.

With that in mind, here's why frequent Costco shoppers may want to seriously consider upgrading to an Executive membership, even if your goal is to keep your living expenses as low as possible.

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What do you get with the Executive membership?

The Executive membership has several perks, but for most shoppers, the most significant by far is an annual 2% reward certificate for your Costco purchases. In other words, Costco will add up how much you spent on qualifying purchases throughout the year and issue you a reward certificate equal to 2% of your spending, redeemable for Costco purchases.

There are only a few types of Costco purchases that are excluded. Most notable are gas, tobacco, gift cards, and food court purchases. In some states, alcohol and prescription purchases also don't count.

We'll get into the math of the annual reward in the next section. But in addition to the 2% reward, there are a couple of other benefits.

• Extra benefits on travel: If you use Costco's travel platform to book vacations, the Executive membership can get you additional benefits, such as resort credits.
• Extra perks and savings on services: If you're an Executive member and you use Costco to purchase certain services, such as auto insurance, you can get extra perks and/or discounts.

To be sure, these perks can be great if you use them. But the 2% reward is the major benefit that applies to everyone who shops at Costco.

The rewards can add up more than you think

At first glance, a 2% reward might not sound like it's worth paying an extra $60 per year. But consider the math behind it.

Here's the key point. In order for a 2% reward to be more than the $60 difference in membership costs, you'll need to spend at least $3,000 per year on Costco purchases.

You might be surprised by how much your Costco spending can add up, especially if you do most of your grocery shopping there. Spending $3,000 per year translates to $250 per month, or about $58 per week. It's fair to say that many frequent Costco shoppers' budgets far exceed these spending thresholds. If yours does, an Executive membership will pay for itself.

The bottom line on the Costco Executive membership

Again, if you spend more than $3,000 per year on Costco purchases, a Costco Executive membership can earn more in rewards than the $60 annual difference in price. It can really be worth the cost if you spend significantly more, or if you frequently book travel or buy other services through Costco.