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When it comes to joining Costco, there are two memberships to choose from. A basic Gold Star membership at Costco costs $65 per year, while an Executive membership costs $130.
But there’s a big perk to the Executive membership — earning 2% cash back on purchases. And if you spend $3,250 per year at Costco, which is certainly feasible if you shop there twice a month or more, you make back the $65 upgrade fee. From there, every additional dollar of cash back you earn on your Executive membership is money in your pocket.
The Executive membership clearly offers a lot of value, because it’s Costco’s most popular. But here are a few drawbacks of an Executive membership you should know about.
1. Certain purchases aren’t eligible for cash back
An Executive membership at Costco will give you cash back on most of the items you buy, including appliances and travel packages. But there are certain purchases that don’t qualify for cash back with an Executive membership. These include:
- Gas
- Cigarettes
- Alcohol
- Stamps
- Food court meals
- Costco Shop Cards (the store’s version of a gift card)
The good news, though, is that with the right credit card, you can set yourself up for cash back even if your Executive membership won’t give you any. Click here for a list of the best credit cards for Costco so you can maximize your rewards.
2. There are certain purchases you can’t make with your rewards certificate
As an Executive member, you’ll be issued a rewards certificate once a year that you can use for purchases at Costco. But there are certain purchases you can’t spend your rewards certificate on. These include:
- Gas
- Food court meals
- Travel (though remember, travel bookings earn you cash back)
- Costco.com purchases
That said, if you want to use your Executive membership reward for online purchases, you can always redeem it for a Costco Shop Card at a store and then use that Shop Card to check out online.
3. You may be tempted to overspend knowing you get cash back on what you’re buying
The nice thing about Costco is that you’ll find a wide variety of products for sale under the same roof. But that can also be a bad thing, since it could lead to overspending. And you may be especially inclined to overspend if you have an Executive membership.
Because that membership puts cash back in your pocket, you might more easily justify certain impulse buys knowing you’ll get a portion of your spending back. But that’s not a great line of thinking.
If you impulse-buy a $20 sweater you don’t need, you’re getting $0.40 back with an Executive membership. That’s hardly going to soften the blow of an extra $20 charge on your credit card.
Costco’s Executive membership makes sense for a lot of people. And if you shop at the store regularly, it could very well make sense for you, too. Just keep these pitfalls on your radar if you’re going to upgrade your membership. And take steps to work around them, like being savvy with the credit card you use or reminding yourself to stick to a shopping list so you don’t go over your budget.
Top credit card to use at Costco (and everywhere else!)
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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.
