This is to talk about some downgrade options for a Citi prestige card, talk about how to maximize the value for credit cards, how to get the most cash back and also how to travel for free, and the advantage and disadvantage for each card, and it depending on the circumstances.
Today we are going to talk about whether the Costco executive member should make sense if you are new here we're all about how to maximize the value for credit cards. How do you get the most cash back and also how to travel for free, let's get started.
One thing I'm going to do is I'm going to separate the Costco membership from the Costco executive membership, so we're not talking about whether a Costco membership by itself is worth it, just because I think there's a lot more to that, and again personally I'm still doing a bit of research, and there's just a lot of stuff to quantify it whether executive members should make sense, though is pretty easy to quantify calculate for the most part.
It's a break-even calculation, the main benefit of the executive membership is that you get two percent on your purchases at Costco, you can get up to a thousand dollars per year, there are some exceptions to this, so we are going to talk about those.
The other value of the executive membership is that you do get a greater discount on some different Costco services, a few examples being cheque printing, identity protection, and free roadside assistance for vehicles. If you go through their auto insurance program for me, for my use case I haven't really gotten any extra value beyond the extra 2%.
I'm not really going to value any of that, but we will run through another calculation where if you do want to put a valuation on those other services, you can just figure out your specific breakeven for the two percent exceptions, there are a bunch of them, so I'm not going to read through all of them, the ones that really stand out to me are tobacco-related products, gasoline, as well as Costco cash cards to me.
This does make a lot of sense just because otherwise you could abuse is pretty easily cost, cash cards, as well as Amazon to me, are probably some of the closest gift cards to cash, that exists if you compare it to other gift cards at least since you can buy so many different other things. If you could sell it for a 1% discount when you could technically arbitrage the 2% that you're getting and the 1% it's costing you, so just make it unlimited one percent for the most part.
I don't think that makes any sense, I think it's kind of bad use of time, but again I guess that's why they have a rule there just to provide Gaming.
The final thing we need in order to figure this out is the cost difference, so if the executive one you're paying 120 and if the baseman you are paying a sixty, both of these you can still add one other person, so again there's no difference. So, for the most part, we're excluding that for you personally, though you might still want to be included into your breakeven calculation, especially if you have someone who's paying you for maybe half of that benefit.
on one side you have minus $60 and on the other side, you have minus $20 plus 0.02 X, 2 percent back on overspend there, and then plus y, which is any other benefit. Step up that you receive or that you feel like you would receive from having the executive instead of the base one. The first thing you need to do is to define Y, again for me Y is equal to zero, just because I'm not really getting any other step of benefits for you.
Why am I equal zero dollars or maybe it equals $100? Technically speaking, if it equals more than $60 or even just $60, that's going to be the break-even point. If it's more than that by default you actually already should get the Costco executive 1 even if you spend $0 at Costco, just because you're getting more benefits. If Y is equal to zero then again this is going to be super straightforward, just because when you solve for X that's $3,000, so this means that if you spend exactly $3,000 at Costco, you're impartial to getting either of the cards if you spend less than that amount, and you should get the basic membership if you spend more.
So even if you spend three thousand and one dollars, mathematically speaking, you should get the executive one, just because we're spending three thousand and one dollars though, again it might not make sense to go online to just get that increased value, just because it's material.
One thing I've mentioned is that it does not make sense to get the base member in the first year and that it always makes sense to get the executive one, so the main reason for this is because you're one. If you do not get positive expected value Costco is actually going to refund you the difference, this means that if your refund check is less than $60 they will downgrade your account, and basically just refund you the difference.
For example, let's say you spent $1500 at Costco, your refund check is going to be $30, so you would just take that refund check up to the front desk, and tell them that I'm not getting positive expected value, and they're going to give you the extra difference, so cover your technically your losses that you would have had by picking this option, and they're just going to downgrade you.
This isn't something that you have to feel bad about, because it's something that they advertised, and this is something that the market pretty heavily, especially when I was considering getting a card and just before hands. This has just been my experience, at least that this is something that they stand behind, and that they're fine with giving this in your one.
You should always get the executive one, and then worst case who end up wasting maybe five or ten minutes downgrading the card, and I don't think that people who work there will feel too bad about it, but I guess their hope is that you would need to forget to downgrade or feel that it's not worth your time, and then just keep paying the executive difference moving forward.