Here’s how much Costco Executive members should spend to maximize their cash back rewards

Earning 2% cash back on most of your purchases is one of the best benefits of being a Costco Executive member. Many households will quickly earn enough rewards to cover the Executive membership fee and more. If you combine those rewards with a Costco credit card, you’re really cooking with gas.

There is a limit to the number of Executive Rewards you can accumulate — Costco caps the total at $1,250 per year. But don’t worry. Even if you have a large family and shop at Costco every week, you’d probably have trouble hitting the bonus cap. That translates to a total of $62,500 a year in expenses — about $5,210 a month.

Below, we’ll talk about how you might hit that cap — as well as the best ways to maximize your Costco membership.

How Costco Executive Rewards Work

Earn Executive Rewards every time you shop at Costco. Most spending is eligible, whether in-store, on the Costco website, or through Costco Travel. There are some exceptions, such as gas, cigarettes, gift cards, and alcohol in some states. To check your rewards balance, log in to the Costco website and go to your account details page.

Costco pays rewards in the form of an annual gift certificate. Executive members will receive their certificate approximately two months before their membership is due for renewal. You can put your rewards certificate toward most Costco expenses, though you can’t use it at gas stations or the food court.

Reaching the Costco Executive Membership Cap

Whenever you sign up for services that charge an annual fee, think about the value you’re getting. For example, calculate how much you need to spend to earn enough rewards to cover the fee. If there is a cap on your cashback, it’s also good to know if it’s possible to reach it.

In terms of tax coverage, a lot of households would easily get there with food spending. The Costco Executive membership costs $130 per year, while the basic Gold Star membership costs $65. So if you earned 2% rewards on about $270 of monthly spend, that would cover the extra $65 you pay for the Executive membership. (A monthly spend of just over $540 would cover the entire membership.)

Maximizing your membership rewards is another story. It’s certainly not impossible to do—in fact, some Costco redditors say they bought a second annual membership after maxing out the rewards on their first. Even so, most households are unlikely to come close.

The average American spends about $830 a month on groceries, according to research by The Motley Fool Ascent. Let’s say someone buys all their groceries from Costco, along with some personal care products, clothes, and sundries. That could put them close to spending $1,000 a month at the warehouse giant.

The story continues

To spend over $5,000 a month in Costco, you might need to book a few vacations, buy a lot of gold bars, bring a few friends to shop with you, and eat nothing but Kirkland products. In short, very few Costco shoppers have to worry about spending their Executive Rewards.

How to get the most out of your Costco membership

Getting value from your membership means spending wisely, which isn’t the same as simply spending more. Those wide aisles are a treasure trove of interesting products and deals, making it easy to spend more than you intended. Stick to your list and track your costs.

1. Combine Executive membership with a cash back credit card

There are some great rewards or cash back credit cards that work well with Costco purchases. Combining the 2% executive member bonus with a credit card that pays 1% or 2% on purchases is a powerful combination. Just make sure you pay off your balance in full each month so interest doesn’t eat into your earnings.

2. Use all the benefits of your Costco membership

The Costco membership fee gives you more than cheap groceries. Check the Costco Travel Portal for vacation and car rental deals when you book your next trip. Costco’s optical and pharmacy services can also be a great value. And that’s before we talk about insurance and car deals. Don’t assume that Costco will always have the best deal, but don’t forget about those extra services either.

3. Watch out for extra savings

Be on the lookout for deals on products you buy regularly. The more you shop at Costco, the more you develop a nose for which items are often discounted. Use Costco’s coupon booklet, website, or app to find the latest deals.

Conclusion

If you spend a lot of money at Costco, it’s worth being aware of the rewards cap for Executive members. But if you’re spending that kind of money, it’s more important to maximize your rewards. Combine your executive rewards with credit card bonuses and cash back apps to get more back from every dollar you spend.

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

Here’s How Much Costco Executive Members Should Be Spending to Maximize Their Cash Back Rewards was originally published by The Motley Fool