Joining Costco could be one of the best financial decisions you'll make in 2024. A Costco membership could make it possible to reap a world of savings on the products you buy all the time, from groceries to cleaning supplies to paper goods. You can even stock up on things like clothing and housewares at Costco at competitive prices.
If you're convinced you're going to join Costco in 2024, the question then becomes: Which membership should you get? You have two options.
Costco's basic membership costs $60 a year. An Executive membership costs $120, but for that $60 upgrade, you get 2% cash back on Costco purchases. If you're not sure which one is right for you, ask yourself these questions.
1. How often do I think I'll shop at Costco?
Some people are willing to drive longer distances to get to Costco. If your closest store is 30 minutes away, it could still make sense to go once a month to stock up on essentials. But if you don't expect to shop at Costco more often than that, then you may be better off with a basic membership.
On the other hand, if you have a Costco less than 10 minutes away, you may find yourself buying groceries there regularly. If so, an Executive membership could really pay off.
2. What's my storage situation at home?
You don't need to live in a 3,000-square-foot home with 10 closets to benefit from the bulk-buying opportunities Costco offers. If you have a decent-sized hall closet and pantry, it may be easy enough to store the bulk purchases you make.
But if your home is truly tiny, then you may be limited in your ability to take advantage of your Costco membership. Sure, you might be able to bring home a single bulk pack of tissues or toilet paper. But can you fit a mega-pack of tissues, toilet paper, paper towels, and paper plates at the same time? Maybe not.
If you don't have much room for storage, it could lead to less Costco spending. And if that's something you're anticipating, then a basic membership may be your better choice.
3. Am I planning any larger purchases this year?
It takes $3,000 in annual Costco spending to cover the cost of an Executive membership upgrade. That's because you'll pay $60 for it, and 2% of $3,000 is $60. Once you spend $3,001 at Costco in a single year, the Executive membership makes it so you've come out ahead financially.
You may not think you'll spend $3,000 or more at Costco on food and household essentials this year. But if you're planning to make one or two larger purchases, and you decide to get them at Costco, that could push you over that threshold.
Let's say you've been saving up for a new living room TV. That alone could be a $1,000 purchase. If you're also expecting to buy a new laptop this year, that could easily be another $500. So that $1,500 combined is halfway to the $3,000 you need to break even on your Executive membership upgrade.
Remember, too, that vacations booked through Costco are eligible for cash back through an Executive membership. And a family trip alone could cost more than $3,000.
A decision you may not have to lose sleep over
You may be struggling with your Costco membership decision. But one thing you should know is that if you sign up for an Executive membership and don't spend enough in a year to earn $60 cash back, Costco will let you downgrade to a basic membership and refund you enough to make back your $60 in full.
So, let's say you buy the Executive membership and only spend $1,500 in a year. That's just $30 back you're earning.
If you downgrade your membership after a year, Costco will actually give you $30 back at the time. So for the most part, an Executive membership is actually a no-risk proposition. If you're on the fence about getting it, you might as well go for it.
