Is a Costco Executive Membership worth it?

To know me is to know I love Costco.

I do almost all of my grocery shopping at Costco. With a family to feed and frequent guests, buying in bulk just makes the most sense. There are a few things about Costco that I don’t love, like when they suddenly stop stocking my favorite items and the fact that they don’t sell fresh herbs.

I also have a frequent issue with the hours. 10am – 8pm on weekdays and 10am – 6pm on the weekends. As I write this article, it’s a little past 6am, and I wish Costco was open now. I could get my grocery shopping done before work and that would be awesome.

But I can deal with all that thanks to their family-friendly pricing. $2.99/pound for pork belly. $4.99 for a rotisserie chicken. Five dozen eggs for $7. You get the idea.

Anyway. Costco is wholesale, members only retailer that allows you to buy groceries in bulk. Although lots of parents lament over the cost of groceries and the stress of meal prepping, taking a little bit of time to organize your household grocery budget can make a huge difference in your life.

Grocery shopping at Costco is a financial game changer

A while back, I revamped our household budget to minimize our expenses. I took a look at what we were spending and slashed everywhere I could. One of the biggest line items aside from housing? Groceries.

The average family of four (with two young children) spends about $815.35 per month on groceries. This estimate averaged the monthly cost of the thrifty, low-, moderate- and liberal plans from the USDA. As your kids get older, your grocery bill grows, too. Annually, the average is about $10k a year on groceries.

You might be thinking, “$10k? How do I spend that much on food?” But it’s really easy to do. Think about how many times you’ve gone to the checkout and been surprised by the bill.

Although I love Trader Joe’s, Whole Foods, and even my local Shoprite and Acme, when you actually take a look at the prices, you’re spending a lot more than you would if you planned and shopped at Costco.

And we’re not talking about pennies. We’re talking about thousands of dollars per year if you shop smart. It’s worth a little investment of your time to plan your groceries ahead.

I was able to reduce my monthly grocery bill to just $400 per month without using a single coupon. If coupons work for you, that’s wonderful. For me, I do not have the time or interest to take on couponing for grocery shopping. Also, many coupons are for processed foods. Since we mostly eat whole foods, coupons don’t really appeal to me.

But does buying the top-tier membership pay off?

If you fall into the “average” family spending, or if you have a family that’s larger than four, you might find that buying the Costco Executive membership pays off. The basic “Gold Star” membership is $60 per year and the Executive membership is $120 per year.

In order to have the membership “pay for itself,” you need to spend $6,000 per year at Costco. How? Well, you get a 2% reward (cash back) at the end of the year, up to a maximum of $1,000. If you spend $6,000 or more, you’ll get $120 or more, which covers your annual membership.

$6,000 * 2% = $120.

What’s the catch?

Well, in year 1 of your Costco Executive Membership, you’d actually need to spend $6,000 in 9 months to get the 2% Reward of $120 or more. Why? The reward is issued three months before your membership is up for renewal. So nine months into your Year 1 membership.

That means you’d have to spend an average of $667/month at Costco for the first nine months of your membership.

But…that’s if you want to have the Executive Membership “pay for itself.”

To have the Executive Membership cost the same as the Gold Star (basic) membership, you only have to spend $3,000.

$3,000 * 2% = $60.

This means you’ll get a rewards certificate for $60, which offsets the $120 Executive cost and makes its effective cost the same as the basic membership.

So is it worth it?

It depends how nitty-gritty you get with your budget. Also, keep in mind that you need to shell out $120 annually for the Executive membership when it renews. $60 out-of-pocket vs. $120 can be a big deal if you’re on a budget.

In my case, I have the basic Gold Star membership, but as I write this article I’m realizing that it would technically save me some money to go with the Executive Membership. In Year 1, I would save $12 versus my current basic membership.

Side note

When we first signed up as Costco members, we didn’t plan to do the majority of our shopping there. We actually signed up to buy coffee and juice boxes in bulk. Our kids don’t drink juice anymore, but as we visited Costco more and more, we saw what a big savings we could have by shopping there regularly.

I wish I started shopping at Costco sooner. Once you really “get” the concept of buying in bulk, you really appreciate the value of Costco’s products. Some people might think I’m cheap, but I think Costco has made me more practical. I cringe at the thought of purchasing something like ground beef or salmon at my local Whole Foods. Although I love, love, love food, the idea of spending $3-$5 more per pound for the same product is sickening. Because I’ve seen what real savings is possible by purchasing wholesale from Costco.

Year 1 Savings for a $400/month budget

$400/month * 9 months = $3,600 (That’s how much I would spend during the Year 1 Reward period.)

$3,600 * 2% = $72. (That’s how much my Year 1 Reward would be.)

$120 – $72 = $48. (This is the effective cost of my membership, after subtracting the Reward from the Executive membership cost.)

Why would I save $12? This is compared to the basic membership, which is $60. Since the Reward makes the effective cost $48, this makes my membership cost $12 less per year.

Year 2 Savings for a $400/month budget

In Year 2 and beyond, assuming there’s no increase to the cost of a Costco membership and my budget remains $400/month, I would save $36 per year versus my current basic membership.

$4,800 * 2% = $96

$120 – $96 = $24.

$60 – $24 = $36 in savings versus the basic membership. Due to the reward, the membership would only cost $24 a year instead of $60 a year. So I’d save $36 off the basic price.

Verdict: Is the Costco Executive Membership worth it?

Yes, the Costco Executive Membership is worth it, as long as you spend at least $3,000 a year at Costco. When you spend $3,000 with the Executive membership, you offset the cost of the membership so it essentially costs the same as the Basic membership. Remember, you’d need to spend $3,000 in the first nine months of Year 1 (about $333 a month) to have the 2% Reward offset the extra cost. But it’s easy to meet that threshold if you do a majority of your shopping at Costco or if you’re a big spender.

What do you buy at Costco?

My list tends to be pretty tame and full of staples like eggs, milk, butter, meat/poultry, and produce. But there are a few random, super value finds that I love to stock up on when we’re out. Things like Krusteaz pancake mix, which is $5.99 for 10 pounds and just needs water to be prepared. The buttermilk pancakes are so, so good. In fact, they’re better than the Whole Foods brand I used to purchase, which was $5.99 a pound. Oh – and here’s a great example of what I mean by cost-savings that count – if you were to buy ten packages of the Whole Foods pancake mix, you would have spent $53.91 more on pancakes than you would if you purchased one 10 pound bag at Costco.

Another great item is microwave popcorn. It seems cheap in the regular grocery store, about $3 to $5 for a box. But the box has four to six packs of popcorn. At Costco, you can get 40 for $9.99. It’s the difference between $0.24 for a bag of popcorn or $0.83. It seems like a small price difference for one pack, but if you eat popcorn once a week, that’s $30.68 more per year on popcorn.

Not yet convinced to join the Church of Costco? If you eat 3x a day, each day of the year, and your food all had the price difference of a package of grocery store popcorn vs. Costco popcorn, you’d be spending $646.05 more per year on the same food. But guess what? You’re likely looking at a much bigger savings. Because Costco, on average, costs more than 20% less for the same groceries.

So if you’re the average American family spending $10,000 a year on groceries, if you switched to Costco for all of your groceries, you could save $2,000 a year or more. Which you could then use to take your family on a discounted Costco vacation. Because let’s face it: Costco has everything, and it’s all a bargain.