Should You Get an Executive Membership When You're Joining Costco for the First Time?

When I first joined Costco, it was before my husband and I had kids, so we decided to stick to a basic membership. While we shopped at Costco frequently enough to make our membership worth paying for, we didn't feel compelled to spend the extra money on an executive membership.

If you're new to Costco, you may be inclined to start with a basic membership, see how things go, and upgrade to the more expensive membership if you find that you're shopping at Costco a lot. But you may also want to opt for an executive membership from the start. Here's why.

It's really a no-risk proposition

A basic Costco membership costs $60 a year, while an executive membership costs $120. But with an executive membership, you get 2% cash back on all Costco purchases you make. So if you spend enough money at Costco, the executive membership can easily pay for itself. (In fact, it takes $3,000 in annual Costco spending to make back the extra money you spend on an executive membership, so for every dollar you spend beyond that, you come out ahead financially.)

Now, if you're new to Costco, you may not know whether you'll end up spending $3,000 your first year. And so you may be hesitant to upgrade your membership.

But here's a lesser-known nuance about that executive membership you may not be aware of. If you sign up for it and don't spend enough to make your money back, you can downgrade to a basic membership before your membership comes up for renewal, and Costco will refund you the difference.

Here's an example. Let's say you go with the executive membership but only end up spending $2,000 your first year at Costco, leaving you with just $40 cash back. If you decide not to keep your executive membership, Costco will give you $20 back to make you whole on the $60 you spent to upgrade. So all told, there's really no risk involved. In a worst-case scenario, all you're doing is shelling out extra money upfront. That's it.

It's a personal choice

When I was a new Costco member, I knew that based on my shopping habits, I was not going to spend enough to justify the cost of an executive membership, and so I passed on the upgrade. And if you're certain you won't spend enough to make back your upgrade fee in cash back form, then you may want to stick to a basic membership for the time being.

But if you're not sure, then you may want to upgrade your Costco membership from the start and see what happens. Since there's virtually no financial risk involved, it certainly isn't a poor choice. And you may be surprised at how much money you end up spending at Costco once you realize how many different savings opportunities your membership allows for.

Also, if you think there's a chance you'll be booking travel through Costco, then an executive membership generally makes sense. Travel purchases are eligible for the 2% back that upgraded membership offers, and you might end up spending $3,000 or more on a single trip.