Image source: Upsplash/The Motley Fool

People who shop at Costco often enough are usually encouraged to upgrade from a basic membership to an Executive membership. The obvious downside of Costco’s Executive membership is that it costs twice as much as a Gold Star membership — $130 a year vs. $65.

But in exchange, there’s a big benefit to enjoy — 2% cash back on your Costco purchases. And if you spend enough, you may find that you can recoup your $65 Executive membership upgrade cost and come out ahead.

That said, there are some drawbacks to signing up for Costco’s Executive membership. Here are a few you should know about before you upgrade.

1. You may end up overspending

It’s easy to fall victim to impulse shopping at a store like Costco, where there’s so much inventory to choose from and the prices are fantastic. But having an Executive membership could make you even more likely to overspend.

Since the Executive membership gives you cash back, you might feel you can spend more freely because a portion of what you’re paying comes back to you. But while that’s true, it also means you risk ending up with credit card debt from charging purchases you can’t afford to pay for in full. If you’re going to get an Executive membership, you may want to set a weekly spending budget to make sure you’re not going overboard.

2. You have to lay out more money upfront

The nice thing about an Executive membership at Costco is that you can downgrade it to a basic one at any time. And if you’re not satisfied with your Executive membership — say, because you didn’t rack up enough cash back on it — Costco will refund you the upgrade fee so you’re not out the extra $65.

Knowing this, you may be more inclined to take a chance on the Executive membership. But even though you’ll be reimbursed your upgrade fee if that membership doesn’t work out, you’re still laying out the money upfront. And if you’re on a tight budget, having to renew your Costco membership at $130 vs. $65 could put a serious strain on your finances the month you do so.

3. You won’t earn cash back on everything

With an Executive membership, you can earn cash back on a host of Costco purchases that go beyond regular groceries and household essentials. Travel purchases booked through Costco are eligible for 2% back on an Executive membership. So are things like appliances and electronics.

But there are several popular Costco buys that won’t earn you cash back. Gas is a big one. If you fill up your car at Costco every week, that’s a lot of missed opportunities. And while Costco’s food court tends to be reasonably priced, the meals you buy there won’t earn you cash back on an Executive membership, either.

Of course, you can make up for the lack of Executive membership cash back at Costco fuel stations by paying for gas with the right credit card. Click here for a list of the best credit cards for gas rewards.

Another way to earn cash back

Although there’s a big benefit to upgrading your Costco membership, it’s important to be aware of the downsides, too. If you decide an Executive membership isn’t worth it for you, or if you can’t comfortably afford the $65 upgrade fee, know that there’s still a way to earn cash back on your Costco purchases. All you need to do is get your hands on the right credit card.

Click here for a list of the best credit cards for Costco shoppers. It’s a great way to earn rewards on your purchases without having to spend extra money on a membership.

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.