3 Signs It's Time to Downgrade Your Costco Membership

Joining Costco is a great way to save money on groceries, cleaning essentials, and a host of purchases. Costco carries everything from houseware to apparel to electronics in its stores, so even if you're someone who doesn't do a ton of cooking or cleaning, paying for a membership could still pay off.

Now, there are two types of Costco membership you can choose from. A basic membership costs $60 a year and doesn't give you cash back on your purchases -- though your credit card might. An Executive membership, on the other hand, costs $120 a year but gives you 2% cash back on Costco purchases. That includes everything from groceries to travel.

Some people upgrade their Costco memberships and then get into the habit of paying the extra money without taking the time to think about whether the higher fee still makes sense from year to year. So if you've had your Executive membership for a while, it pays to run through that exercise. Here are a few signs that it may be time to downgrade to a basic membership.

1. You've moved to an area where you no longer have easy Costco access

Maybe you decided to move to a more rural part of the country. Or maybe you've simply gone from a suburb that had a Costco store 10 minutes away to a different suburb where the closest Costco is a 30-minute drive away.

The harder it is for you to access Costco, the less likely you are to shop there frequently. So if you've noticed your trips are becoming increasingly spaced out, it may be time to downgrade to a less-expensive membership.

2. You've become an empty-nester

When you're feeding a family, you can easily spend a small fortune on groceries and snacks. And similarly, when there are a bunch of you under the same roof, the cost of items like toilet paper, soap, and similar items can add up.

But if you've recently become an empty-nester, it may be time to rethink your Executive membership. Chances are, you won't be buying nearly as much if you have fewer mouths to feed.

Incidentally, becoming an empty-nester should prompt you to reassess your entire budget. You may have expenses you no longer have to cover with your kids grown up and out of the house. For example, if you were covering the cost of cable or a streaming service your kids enjoy but you (or you and your spouse) don't watch, that's a bill you might as well shed.

3. You don't expect your annual spending this year to exceed $3,000

There's a really simple formula you can use to determine which Costco membership is right for you. It takes $3,000 in Costco spending each year to make back the $60 cost of the Executive membership upgrade, since $60 is 2% of $3,000. So if you're spending $3,001 or more per year at Costco, then the more expensive membership pays off. 

Take a look at your Costco spending from 2023. Also take a look at your spending over the past four months. If it seems unlikely that you'll reach or exceed the $3,000 mark this year, then you have your answer.

Costco's Executive membership can be a great deal for a lot of people. But make sure you're not throwing away an extra $60 a year.