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When I first joined Costco about 18 years ago, I decided a basic membership made the most sense for my household. Back then, it was just me, my husband, and a small dog, and we didn't need to shop at Costco more than once a month to load up on cleaning supplies and non-perishables. It didn't make sense to buy groceries in bulk from Costco because we wouldn't use them up in time and get our money's worth.
But at some point after having kids, I made the decision to upgrade to an Executive membership at Costco. And I've paid for the higher-cost membership ever since.
It's that decision, though, that's allowed me to get my Costco membership for free. And the same trick could work for you, too.
Spending enough to get your Executive membership paid for
Costco's Executive membership costs double what a basic membership costs -- $130 a year, versus $65. But there's a big perk associated with the Executive membership -- 2% cash back on your Costco purchases.
To be clear, you won't get 2% back on everything at Costco. Gas station fill-ups aren't eligible for that cash back, and neither are food court purchases.
But in addition to in-store purchases like groceries, paper products, apparel, and electronics, travel packages booked through Costco are eligible for 2% back on an Executive membership. The same applies to furniture and other big-ticket items that could really add up.
When you do the math, you'll see that it takes $6,500 in annual spending at Costco to earn $130 back from an Executive membership. But for me, that number isn't so hard to get to.
I shop at Costco almost every week during the year and commonly spend between $100 and $150 per trip. If we average that to $125 and multiply it by 50 weeks during the year, we get to $6,250.
From there, all it takes is a few one-off purchases to spend another $250 over the course of a year. And since I commonly turn to Costco for things like kids' clothing and holiday gifts, I can easily earn $130 in cash back, thereby getting my membership for free.
Do you spend enough at Costco to score a free membership?
You shouldn't specifically spend more money at Costco for the sole purpose of getting your membership for free. If you'd normally only spend $5,000 a year, it doesn't make sense to intentionally spend an extra $1,500 to get your $130 membership fee returned to you in the form of cash back.
But it does make sense to crunch the numbers and make sure you're paying for the right membership to begin with. If you spend more than $3,250 a year at Costco, then an Executive membership absolutely pays off, even if you don't earn enough cash back to get that membership for free. That's because 2% of $3,250 is $65, which is the cost of upgrading from a basic Costco membership to the Executive one.
And you may find that if you shop at Costco as often as I do, that you're able to earn enough cash back to recoup your entire $130 outlay. Or, you may find that you're able to spend $6,500 a year by doing a big stock-up at Costco once a month, but also booking a family vacation you earn 2% back on.
Even if you don't manage to score a free Costco membership, it's not the end of the world to pay that fee for the savings it might give you through the year. And if you want to maximize your savings at Costco, be sure to use the right credit card for your purchases.
Click here for a list of the best credit cards for Costco shoppers. These could put more money in your pocket whether you have an Executive membership or decide to stick with a basic one.
Top credit card to use at Costco (and everywhere else!)
We love versatile credit cards that offer huge rewards everywhere, including Costco! This card is a standout among America's favorite credit cards because it offers perhaps the easiest $200 cash bonus you could ever earn and an unlimited 2% cash rewards on purchases, even when you shop at Costco.
Add on the competitive 0% interest period and it's no wonder we awarded this card Best No Annual Fee Credit Card.
Click here to read our full review for free and apply before the $200 welcome bonus offer ends!
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
