This $60 Costco Investment Could Be Your Smartest Financial Move Yet

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You could get a basic membership at Costco. But read on to see why upgrading to an Executive membership makes so much financial sense. [[{“value”:”

There are different investments you can make that might put money in your pocket. For example, you could buy stocks that gain value over time or that pay dividends every quarter. You could also buy bonds that pay you interest on a regular basis.

Many people today are also investing in CDs for the risk-free returns. The nice thing about CDs is that unlike a stock portfolio, you can’t lose out on any principal due to changes in market conditions. As long as your bank is FDIC insured and your deposit is $250,000 or less, you can only earn interest — you can’t lose any of the money you put in.

But there’s a low-cost investment you can make at Costco that also has the potential to pay off big time. In fact, if you have $60, you can set yourself up to earn a load of cash back in the course of your shopping.

It pays to update your Costco membership if you shop there often

Costco shoppers get to choose between two membership tiers — a basic (or Gold Star) membership, which currently costs $60 per year, and an Executive membership, which costs $120. If you’re wondering why anyone would want to pay an extra $60 to join Costco, the answer is simple.

By paying for an Executive membership, you’re eligible for 2% cash back on your Costco purchases. And those could add up to a sum that far exceeds the $60 upgrade fee. You might even earn enough cash back to pay for your entire Costco membership — and then some.

Say you shop at Costco most weeks during the year and spend $150 each time. If we multiply $150 by 50, we get $7,500. At 2% back, with an Executive membership, $7,500 in spending gives you $150. That’s enough to cover the entire $120 an Executive membership costs and still leave you with extra cash to play with.

Plus, if you’re a regular Costco shopper, you might make some one-off purchases during the year that lead to even more cash back. If you typically spend $150 per week at the store but also buy a new TV on Black Friday and load up on holiday gifts, your annual spending might come to $10,000. At 2% back, you’ll get a cool $200 coming your way.

Of course, the risk in upgrading to an Executive membership at Costco is not spending enough to recoup your $60 upgrade fee. But the reason it’s really not a risk is that Costco will allow you to downgrade your membership to a basic one if the Executive version doesn’t work out and pay out the difference between the cash back you accrued and the $60 cost to upgrade.

So let’s say you get an Executive membership and only spend $2,500 at Costco. At 2% back, that’s only $50 coming your way, so you’re out $10 based on the $60 it costs to upgrade. Except if you downgrade to a basic membership, Costco will refund you the $10 you didn’t recoup. So either way, you’re made whole.

Upgrade now, before the cost of an Executive membership goes up

The $60 basic membership fee and $120 Executive membership fee are what it costs to join Costco today. But come Sept. 1, these fees are rising. At that point, a basic membership will cost $65, and an Executive membership will cost $130.

Granted, these price increases aren’t so huge. But if you’ve been thinking about getting an Executive membership at Costco, you might as well upgrade before September when it’s cheaper to do so.

There are a lot of good ways you can put $60 to use. But paying for an Executive membership upgrade could be your smartest financial decision yet.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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