When you shop at Costco, it’s often challenging to know how much money you’re saving, because you’re buying in quantities that don’t match what you might purchase at a regular store. The challenge of buying in bulk, of course, is that value goes down if you don’t finish everything you purchase.

Given that I live in a small household, just me, my wife, and our 21-year-old son who’s not home that much, that makes buying bulk food challenging. We’re not going to eat 24 croissants or finish a sheet cake unless we’re having people over.

You also have to be careful when buying cleaning products or over-the-counter medicine at the warehouse club, because those items do expire. As a seasoned shopper and someone who has covered the retail industry for over 30 years, I’ve made my share of Costco mistakes.

I have thrown away K-Pods that went bad, and once bought enough toothbrushes to supply myself for roughly a decade, only to lose track of them during a move. Those errors bring down the overall value of your membership, and it’s tricky to know exactly what you’re paying per item when you don’t use everything you buy.

There is, however, one area where it’s very easy to track your savings at Costco, buying an Executive Membership instead of a Gold Star one.

Costco’s Executive members save money

When you join Costco as a household, you can opt for a $65 Gold Star Membership or a $130 Executive Membership. Opting for the cheaper one seems like a good idea until you learn the biggest perk of the more expensive membership.

Costco Executive members get 2% cashback on most purchases up to $1,250 each year. That means if you spend enough money, the upgrade pays for itself.

“Calculating if the $130 Executive Membership is worth the upcharge is simple. Because you get 2%, you’ll need to spend $3,250 to receive $65 in cash back. At that point, your effective annual membership rate is back down to $65,” CNBC reported.

The math is pretty simple, and Costco’s membership page (membership required) even offers a calculator so you can keep track.

“If your annual spend regularly tops $3,250, you’re better off with the Executive Membership. Every additional dollar you spend after $3,250 will bring your annual fee further and further below $65 and end up saving you money in the long run.

Costco notes on its membership page that most Executive members earn enough rewards to offset the higher fee.

Costco pushes the Executive membership

The majority of Costco’s operating profit comes from selling memberships. The chain has worked hard to make the Executive Membership attractive, and nearly half of its members (47%) have opted for the pricier option.

CFO Gary Millerchip talked about membership revenue during the chain’s first-quarter earnings call.

“Excluding the membership fee increase and FX, membership income grew 7.3% year over year. This was driven by continued growth in our membership base and increased upgrades from Gold Star to Executive Membership,” he shared.

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In Q1 Costco also added extra shopping hours for Executive members which likely drove added signup.

“At Q1 end, we had 39.7 million paid executive memberships, up 9.1% versus last year. We ended the quarter with 81.4 million total paid members, up 5.2% versus last year and 105.9 million cardholders, up 5.1% year over year,” he added.

The CFO also noted that renewals remain strong.

“In terms of renewal rates, at Q1 end, our U.S. and Canada renewal rate was 92.2%, and the worldwide rate came in at 89.7%, both down 10 basis points from last quarter. This slight decline was due to the factors we discussed last quarter and reflects new online members growing as a percentage of our total base and renewing at a slightly lower rate than warehouse sign-ups,” he shared.

Costco opens early for Executive members.

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What Costco Executive members get

  • 2% Annual Reward on Purchases: Executive members earn a 2% reward on most qualifying Costco purchases (in warehouses, online at Costco.com, and on Costco Travel).
    This reward is paid as a certificate you can use like cash toward future purchases.

    Reward earning has a cap of $1,250 per year.

  • Early or Exclusive Shopping Hours
    Most Costco locations now allow Executive members to shop earlier at 9 a.m. for an hour before standard members on weekdays and Sundays.
  • Monthly $10 Credit (Instacart/Same-Day)
    Executive members get a $10 monthly Instacart/same-day delivery credit on orders over a set minimum of $150.
  • Additional Costco Services Perks
    Executive membership includes enhanced benefits or discounts on various services like travel packages, insurance, and check printing.

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Analysts like Costco’s Executive members change

“The earlier hours add another benefit to the Executive tier of the membership program. Yes, it may cause a little confusion (and even resentment) but it may also encourage some people to trade up to a higher tier. It’s not as if other tiers lose anything as the opening hours will remain the same as they are now,” GlobalData Managing Director Neil Saunders wrote on RetailWire.

His Brain Trust Colleague David Biernbaum, who has over 40 years of retail experience, does, however, see some potential risk for the chain.

“Exclusive hours may appeal to some customers seeking a more personalized service, but they may also alienate others who are inconvenienced by the restricted access. This limitation may deter potential Executive members from shopping during the designated times, potentially resulting in a loss of sales. Furthermore, managing these exclusive hours could entail additional operational costs, which could offset any potential profit increases,” he posted.

Most Brain Trust members, however, saluted the warehouse club’s move.

“The extended hours are a great benefit for both in-store shopping and BOPIS to have the extended hours and less shopper competition for the higher tier which is often hard to show value to. Form a club operations point of view it should not be a major lift as there are already employees in the store replenishing the clubs,” Perry Kramer added.

Brad Halverson, a brand marketing expert in the retail space, thinks the numbers just make sense for the chain.

“We know Costco’s profit model is based on its annual membership fees. My math isn’t fully accurate, but if roughly 5% of 2024’s 73,000,000 current Gold Star members buy up to Executive Level, a nice $234,000,000 drops directly to the bottom line,” he shared.

“Like Disney parks and ski resorts with premium tiers for first entry and shorter lines, this will interest some customers in seeing if it saves time, hassles.”

Related: Costco quietly added a major credit card perk