Is Costco’s $120 Executive membership actually a good deal?

If you’re a Costco member, you’ve probably had this experience. 

You’re waiting on the checkout line when an employee holding a tablet asks if they can scan your membership card. They take a look at your profile and tell you that you’re a good candidate for the Costco Executive membership. 

In fact, you’re such a good candidate that they’d be happy to go ahead and upgrade you right on the spot. What do you say? 

On paper, the $120 Executive Membership sounds like a great deal. For just an additional $60 a year you can start receiving 2% cash back on all of your Costco purchases. If you combine it with the Costco Anywhere Visa card — which also gets you 2% back at the wholesale store — you’re getting an impressive 4% back every time you buy a 35-pack of Diet Coke. 

But you shouldn’t make an impulsive decision about upgrading your membership.

Instead, take some time to review your spending and assess your needs to see if it will actually be a good deal for you. Here’s what you need to know. 

The main information you’ll need to determine if the Executive membership is worth it is how much money you spend at Costco each year. 

Calculating if the $120 Executive Membership is worth the upcharge is simple. Because you get 2%, you’ll need to spend $3,000 to receive $60 in cash back. At that point, your effective annual membership rate is back down to $60. 

If you spend less than $3,000 at Costco each year, you’ll end up spending more money overall with the Executive membership’s higher annual fee than if you had stuck with the $60 Gold Star tier. If you fall into this bucket, the no-fee Costco Anywhere Visa card is a better choice if you’re looking to get cash back from the store.

But if your annual spend regularly tops $3,000, you’re better off with the Executive Membership. Every additional dollar you spend after $3,000 will bring your annual fee further and further below $60 and end up saving…