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All Costco Members Should Do This Before They Renew

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Image source: Upsplash/The Motley Fool

A Costco membership can do plenty of great things for you. If you have a larger household to feed, buying groceries at Costco could lead to a world of savings. And if you’re someone who enjoys traveling, booking trips through Costco could give you access to not just unique itineraries, but affordable vacation packages.

As a paying member of Costco, you’ll eventually reach the point when your membership comes up for renewal. And if that’s happening soon, there’s one key step you need to take.

Make sure to choose the right Costco membership tier

Costco offers customers two membership tiers. A basic membership costs $65 per year, while an Executive membership offering 2% cash back on purchases costs $130.

You may be inclined to stick with the membership tier you’re already signed up for. But before you renew your membership, you should calculate your Costco spending from the past year to see which tier makes the most sense.

Based on the Executive membership’s 2% cash back rate, $3,250 in annual Costco spending puts $65 in your pocket, which is the exact cost to upgrade. If you spent more than $3,250 over the past year, then it makes sense to pay the extra money for the Executive membership going forward, since you’re likely to come out ahead financially. But if you spent a lot less than $3,250 in the past year, you may want to stick with a basic membership or downgrade to one if you’re currently an Executive member.

That said, if your Costco spending over the past year was close to $3,250, then you should probably stick with or upgrade to the Executive membership in that situation, too. The reason? A small increase in your spending could make it so the cash back you get from an Executive membership exceeds the $65 upgrade fee.

Costco guarantees the Executive membership

You should also know that if you don’t make back your $65 in cash back with an Executive membership, Costco will allow you to downgrade and refund you the difference.

Let’s say you spent $3,000 at Costco in the last year, which would mean $60 back at a rate of 2%. It’s not inconceivable that your spending might increase by a few hundred dollars this year.

But if that doesn’t happen, and you only rack up $60 in cash back on your Executive membership, Costco will refund you $5 when you go to downgrade. So the only reason to steer clear of the Executive membership is if your recent spending for the year was nowhere close to $3,250 and you’re confident you won’t get close this year between your regular spending and large one-time purchases.

You can still earn cash back at Costco with a basic membership

You may run the numbers before renewing your Costco membership and realize that the Executive tier doesn’t make sense. But that doesn’t mean you can’t earn extra cash on your Costco purchases.

Want to rack up cash back without having to pay the additional $65 an Executive membership costs? Click here to sign up for a credit card that offers great rewards for Costco shoppers. That way, you don’t have to worry about spending enough for that membership to make financial sense, nor do you have to worry about remembering to downgrade down the line.

However, you should also know that if the Executive membership does make sense for you, you can double dip and earn your 2% back from Costco on top of whatever cash back or rewards your credit card pays you. And that’s a pretty sweet situation to put yourself in.

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.
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.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.

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