Before You Downgrade Your Costco Membership, Read This

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It makes sense to pay for a Costco membership if you shop at the store fairly often and are able to save money consistently on purchases like groceries and household essentials. But that doesn't necessarily mean you need to pay for an Executive membership.

Recently, the cost of an Executive membership rose from $120 per year to $130. Granted, the cost of a basic Gold Star membership increased, too -- from $60 per year to $65. But given the recent fee hike, you may no longer love the idea of paying extra for Costco access, despite the 2% cash back your Executive membership gives you.

Now, one thing you should know is that Costco allows you to downgrade your membership at any time. If you don't want the Executive membership anymore, you can switch to a basic one. Before you make that move to save money, though, run the numbers carefully.

When the higher-cost Costco membership still makes sense

Now that an Executive membership at Costco costs $130 instead of $120 per year, it requires even more annual spending to recoup the cost of the upgrade. It used to be that spending $3,000 a year at Costco put your $60 upgrade cost back in your pocket. However, now that the Executive membership costs $130, you'll need to spend $3,250 at Costco per year to recoup the extra $65 for the upgrade.

You might assume that it makes sense to downgrade to take the pressure off, but before you do that, look at the data -- meaning, actually calculate your Costco spending from the past year.

If you generally pay for purchases with a credit card, this isn't so hard to do. Just check your statements for Costco spending and add everything up.

And if that's not possible -- say, because you often pay in cash -- go to customer service at Costco and see if an employee can pull a record of your spending over the past 12 months. Costco should have that information on file.

If you see that you spent close to $3,250 over the past 12 months, then you might as well stick with the Executive membership. If you spent nowhere close to $3,250, then chances are, the Executive membership wouldn't make sense for you even without the fee hike.

Costco stands behind its Executive membership

You should also know that Costco's policy is to make Executive members whole on their upgrade cost. So if you keep the higher-tier membership but don't spend the $3,250 needed to recoup your $65 upgrade cost, Costco will let you downgrade and refund you the difference.

For example, if you only end up spending $2,400 during the year, earning $48 on your Executive membership, Costco will give you the $17 you didn't rack up at the time of your downgrade.

Don't let an extra $10 throw you

It's frustrating that everything costs more these days than it did a few years ago. And that extends to a Costco membership.

But before you dump your Executive membership over an extra $10, look at the big picture. You may be annoyed over having to pay more. But that doesn't mean it isn't worth it to pay more for the cash back involved.

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