Costco's Gold Star membership is $65 per year. Costco's Executive membership is an additional $65 or $130 per year. However, I did the math and upgrading to Executive is "free" and costs nothing at the completion of the year.
Huh? How can paying $65 more be free? By reading the fine print.
The main benefits for Executive membership are:
- 2% cash back reward on all Costco purchases, including vacation packages and gasoline.
- Early entry to stores by 30 minutes on Saturday, and by 1 hour on other days.
OK, so where's the free part? It happens a the renewal of the membership as described below
Free part 1: The 2% cash back reward returns $65 if one spends $3250 during the membership period. That's breakeven for the upgrade to Executive membership. Spend $6500 and 2% cash back reward returns $130, which is the entire cost of an Executive membership.
Free part 2: What if I don't spend $3250? Costco guarantees that the cash back reward is a minimum of $65, which is the cost of the Executive membership upgrade. The cash back reward is issued once a year, just before renewal. If the amount is less that $65, Costco will give the member the difference, either in cash or as payment to the renewal of the Executive membership.
Either way, the $65 upgrade is offset.
Of course, picky financial people might claim there is lost interest for 1 year on the $65. I guess, but that's only $1.95 if the interest rates are 3% which is about the interest rate for a 1 year CD.
Disclosure: I have been a Costco Executive member over 20 years. I have only had submit for the offset twice. Every other time, I have earned more than $65 cash back. Finally, I was not compensated by Costco for this post.
This is not financial nor club membership advice advice. Please consult a professional advisor.
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