Anyone who shops at Costco has probably been asked if they’d like to upgrade their membership.
Costco offers an Executive membership that costs an extra $55 per year and gives people access to some membership benefits as well as 2% cash back on all spending.
While it seems like a good deal at first, I haven’t upgraded to the Executive membership because I think it’s a waste of money for me.
It Leads To Overspending
One of the sneaky ways retailers get us to spend more is by convincing us to spend more to achieve a certain level. Rewards programs are the same, and it can lead to some serious overspending just to attain a certain level of spending or qualify for a specific reward.
The Costco Executive membership costs an additional $55 per year and members get 2% back annually.
This means you’d have to spend $2,750 per year in order for the Executive membership to be worth it (or $229 per month).
The “Costco effect” is when someone goes into the store to buy groceries and ends up buying other items because they are a good deal. In other words, you come in to buy milk & bread but come out with milk, bread, a BBQ and a new bike.
The Executive membership encourages this type of spending because the prices are likely lower than competitors and the more you spend – the more you get back as a 2% cash rebate.
I Don’t Spend Enough Per Month
I’ve looked at my current spending levels and I clearly don’t spend enough per month to justify an Executive membership.
I spend about $130 per month at Costco and I’m perfectly content at that level.
Sure, shopping at Costco definitely allows me to save money because of their lower prices, but I won’t increase my monthly spending simply to justify an Executive membership.
With our current household budget, I’d be better off to cut back on grocery spending overall than I would be to spend more buying an Executive membership (which would make me want to spend even more, as I explained above).
The Benefits Don’t Apply To Me
The Costco Executive membership offers some extra benefits that may be useful for some, but unfortunately most of them don’t apply to me. Here are a few of the benefits (and why they don’t help me):
- Cheap home long distance plans (I do have a home phone but don’t make enough long distance calls to justify the extra cost)
- 25% car rental savings from Avis/Budget (most car rental coupon codes can be found with a quick google search)
- Real estate program – cash rebates for home purchases and sales (I don’t plan on selling any time soon and if I did, I would probably sell privately)
- Discounted home and auto insurance rates (I already have a discount on insurance by combining both home and auto together and shopping around for the best deal annually)
Who Should Get The Executive Membership?
I think the Executive membership would be useful for anyone who can take advantage of the benefits mentioned above. If you need a cheap long distance plan or discounted home/auto insurance rates then it may be right for you.
Ultimately the decision to upgrade your membership depends on whether you spend enough each month to make it worth your while.
Here’s a chart showing whether it’s worth it to upgrade or not:
Monthly Costco Spend
|Annual Rebate||Upgrade to Executive Membership?|
Conclusion: I love Costco, but I know that an upgrade to the Executive membership would lead to overspending by trying to earn more rewards in the form of cash back.
For anyone who is on the fence about upgrading their membership, Costco will refund the difference to anyone who upgrades but later decides it is not for them.
Do you have the Costco Executive membership? If so, has it changed your spending habits?