Tuesday, 23 April 2024

3 Signs Costco’s Entry Level Membership Is Your Best Option

by BD Banks

<div>3 Signs Costco's Entry Level Membership Is Your Best Option</div>

Image source: Upsplash/The Motley Fool

When you join Costco, you have two choices for your membership tier. You could spend $60 to get a year of the Gold Star membership which, despite its fancy name, is the basic or entry-level membership. Or you could spend $120 and upgrade to the Executive membership.

Doubling the cost of joining a warehouse club can actually make sense for some people — but it’s not the right choice for everyone. You should be on the lookout for these three signs that you’re better off becoming a Gold Star Costco member rather than paying the extra $60 to upgrade.

1. You spend less than $3,000 a year at Costco

One of the biggest perks of the Executive membership is that you can earn 2% back on all of your purchases at Costco or Costco.com. You can earn up to $1,000 in annual rewards through this Costco program.

For some people, the 2% back means that the upgraded membership pays for itself. If you spend at least $3,000 at Costco during the year, you would get $60 in annual rewards from this program — enough to cover the upgrade. If you ended up spending more than $3,000, you’d make money on the deal.

If you don’t spend at least $3,000 at Costco annually, though, then you won’t earn enough money to repay yourself for the upfront fee. So, the Executive membership probably isn’t worth it in this situation.

2. You won’t take advantage of perks outside the warehouse club

Costco’s Executive membership offers perks beyond the 2% cash back. You also get some additional savings on other goods and services from Costco beyond the products sold in the warehouse.

For example, while all Costco members can get discounted pet insurance through Figo, Executive members can avoid paying a $15 enrollment fee that others are charged in most states.

You can read about some of the other Costco services, including savings on paper check orders and on vehicle parts and services, at Costco.com. If you will use some of these services and you get a better deal for being an Executive member, then upgrading to the higher tier may be worth it even if you don’t hit your $3,000 spending target. That’s the case if the amount you’re saving due to the additional perks of your upgraded membership is worth more than the $60 extra you pay to get Executive status.

However, if you don’t want to buy insurance through Costco or take advantage of its other services, and you’re purely signing up to shop for goods and services at the warehouse club, then the entry level option is the right choice if you also aren’t a big spender.

3. You’re just trying out Costco for the first time

Finally, if you are just signing up for Costco for the first time, you’re often better off starting with the basic membership before taking the plunge on the upgrade.

You can get a feel for how much you’ll shop there and what perks you’ll use and then decide if putting that higher membership fee on your credit card is worth it. You can always upgrade to the higher membership tier later, once you see that the perks or rewards make doing so worthwhile.

Getting a Costco membership makes sense for a lot of people, but paying for the Executive tier may not be worth it for you if one or more of these points applies to you. Thankfully, Costco’s stellar return policy also applies to memberships, so if you’re not getting the most out of yours, you can ask Costco for a refund at any time.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber 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.