How My Costco Membership is Paying Me $430 a Year

Costco, budget, debt free, financial freedom

If you have never experienced the greatness that is Costco, now is the time to join.  Not only is it the adult playground of grocery stores, but they offer some of the best deals around.

My family and I have a standing appointment with Costco every weekend to wander the isles and have our fill of samples.  The food choices are of great quality and usually taste very good.  They tend to have a lot more healthy options which makes it easier for us to shop wisely.

Because it is a bulk discount store, we also save money on a lot of items.  The bulk food is also packaged in such a way that it is easy to eat smaller portions if you want to. You wont have to open the big container only to have to repackage the food into smaller containers.

You may have never bothered to join or try Costco because of the annual fee, but there is a way to avoid paying that fee and maybe even put some money in your pocket.

The Cost

Costco has two non-business membership levels, Gold Star Membership and Executive Membership.  The Gold Star membership is $60 a year while the Executive membership is $120 a year.

The Executive membership level seems steep, but you get some very worthwhile benefits for that extra $60.  You will get additional travel benefits  and discounts as well as discounts on other Costco Services.

The Gain

However, the best benefit is the 2% cash back that you will get on all Costco, and Costco Travel purchases (under $1K).

This benefit is huge for a store like Costco because they are not just a grocery store.  They sell all sorts of merchandise, like electronics, furniture, clothes, etc.  A little known fact is that you can also by cars and caskets, but they aren’t eligible for the cash back.

The Analysis

The question becomes, can you spend enough to earn enough cash back to pay for your membership?  The answer is…yes.  I’ve calculated the amount you would need to spend to cover the cost.  You only need to spend $500 a month to earn $120 in cash back rewards.

This makes your annual membership FREE.

So, if you are single and only buying for one, you may think this is a hard number to hit.  You may not buy that much in food in a month.

However, when you start to add up when you spend on food, gas, toiletries, pharmaceuticals, electronics, furniture, liquor, $500 may not be too hard to hit.  For families, it wouldn’t be too hard to spend $1,000 a month if you allocated all of your shopping to Costco.

The Win

If you are still a non-believer, there is another benefit that you may not know about.  In 2016 Citibank began to offer a Costco branded credit card.  To get the card you have to be a Costco member and there is no annual fee.

The credit card that Citi created is a Cash Back card offering up to 4% on certain purchases like Gas.  For a card that has no annual fee, this is a great benefit, but it had one more trick up it’s sleeve.

The card offers 2% Cash Back on all Costco purchases!

Yes, you can get 2% cash back from the Executive membership card AND an additional 2% cash back from the credit card.  With 4% Cash Back, you only need to spend $250 a month to pay for your Costco membership!

My family of four is able to spend enough to get $150 back from the Costco membership AND get a $150 rebate from the Credit card.

Now since this is a credit card, you will need to pay it back every month to avoid the interest charges.  These gains are only worthwhile if you are not paying interest or late fees.

Additional Cash Back

I wanted to focus specifically on the benefits on this card from shopping at Costco, but they go beyond just this store.  I have been using it as my primary card for all purchases.  With the other cash back rewards, I have accumulated an additional $250 in cash back rewards in the past 10 months on purchases outside of Costco.

So that is $400 of cash back on the Costco Credit card PLUS a net of $30 after applying the $150 in cash back to the -$120 Executive membership.

Overall the benefits that I have seen for shopping at Costco, buying what I usually would anyway, have made the membership well worth it.  If you have not experienced Costco, now is a good time to give them a try.  If you’re worried about your credit, see my post on what you can do to fix it.

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  1. Recently watched an old episode of the Bernie Mac Show, and in it Bernie discovered the wonders of CostPlus, a store that sold in bulk. I’m a Costco member, but I had no idea about some of these benefits you mentioned. Thanks for sharing the information and overall good financial advice.

  2. Nice one Brian, that reminds me I have to renew my membership next month. I might consider this Citi card but I have 2 other cash back credit cards right now so I’ll check with the wife and see if she wants it. Good article, thanks again.

  3. Excellent read, I recently passed this onto a colleague who has been performing a little research on that. And the man actually bought me lunch because I came across it for him smile So allow me to rephrase that: Appreciate your lunch!


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