Check this post - How to Get A $25 Cash Card For Free from CostCo and American Express 

I mentioned on my previous post Living a Frugal Life that most of our groceries, a few appliances, or some electronic items are bought at Costco. We hardly go to other local grocery stores unless the item that we are looking for is not available at Costco. We save a lot by buying in bulk on most of the grocery items that we use at home. Sometimes the store offers coupons and instant rebates on selected items providing us additional savings.

Costco offers an “Executive Membership,” which cost $100 annually. One of the advantages is that you can get 2% cash back on the purchases that you made. (except for some purchase such as gasoline, gift certificates, stamps, movie tickets, tires, some online products, etc.)

Initially, my membership was a “Gold Star” card and the membership fee was at $50 annually. And then  I noticed the executive membership offer and began to take a look at it. At first, the mere fact that I have to spend $100 on a membership fee made me leery about getting it but the lure of the 2% rebate made me reconsider. So I run the numbers to see how much I have to spend to at least match the $50 fee.

At the $100 annual fee:

Total Purchase 2% Rebate Net Annual Fee
$2,500 $50 $50
$5,000 $100 $0

Based on the above numbers, the savings of the $100 fee can only be achieved if your annual purchase is at least $2,500. As you can see, if you spend $2,500 annually, then the effect is the same as paying the $50 annual fee. Most families shopping at Costco would probably spend and reach the threshold $2,500 and break even. If you spend at least $5,000 per year, as you can see, you’re rebate check will pretty much pay for the annual membership fee. I know you are thinking that not all families will reach or even exceed this mark but there are some families that do. And if you’re a business owner, the rebate might even be bigger because of the volume of your purchase.

My wife and I only spend around $2,500 annually and that includes groceries and other items as well. So how did we take advantage of the benefits of the 2% rebate at this level?

Keep in mind that Costco provides an additional cardholder to your account at no cost. For most us, we always put our spouse or another household member as the additional cardmember. Since my wife and I shop at the same time at Costco most of the time, it did not make sense for us to have her as the additional cardholder. What I did is I added my sister, who can’t obtain the membership on her own and lives in a different household, on my account. Now the combined total purchase for our two families exceeded the $5,000. Because of this, I received rebates of at least $100 that I can use to pay for the annual membership fee. At one point in time, I received a rebate check of $150, which means that I made money from it as well. So our families benefited on the savings at Costco aside from the free membership. On top of that, I have an American Express Card that provides an additional 1% rebate for Costco purchases.

If you’re a potential Costco shopper and you are trying to decide which membership to obtain, I suggest that you start with $50 Gold Star Card and determine the volume of your purchase. You can always upgrade to the Executive member at anytime if you feel that your projected annual purchase can give you a rebate that will be good enough to pay the $100 membership fee.