Costco Just Raised Membership Fees. Are More Hikes in Store?

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Costco’s annual membership fees rose in September. But what comes next? Read on to find out. [[{“value”:”

Costco’s business model is different from other major retailers in that it relies heavily on membership fees to make money. Most stores, like Target and Walmart, don’t charge you a yearly fee just to walk in the door.

Still, millions of customers are willing to pay Costco’s fees for access to savings on groceries and household essentials. And many were willing to take the increase in stride when Costco announced that membership fees would be rising in September.

On Sept. 1, the cost of a basic Gold Star Costco membership rose from $60 to $65 a year, while an Executive membership offering 2% cash back on purchases rose from $120 to $130. In light of this, you may be wondering if more Costco hikes are in store, whether in the form of additional membership fee increases or higher product prices.

The good news, though, is that we’re unlikely to see another membership fee hike for quite some time. And Costco is specifically trying to lower the cost of the products it sells rather than raise in-store prices.

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Your membership fee will probably stay the same for a while

Costco’s September fee hike may not have been something to celebrate. But you should know that the increase was actually two years overdue.

Costco CFO Gary Millerchip said during the company’s most recent earnings call when asked about the September fee hike, “We were very deliberate about the timing. In fact, we’re really delayed by two years from when we’ve traditionally increased the fee every five years and that was initially because of what we thought our members were experiencing with COVID and then we saw higher inflation.”

Millerchip also went on to note that so far, there doesn’t seem to be a lot of backlash regarding the fee hike. If anything, he thinks customers are appreciative of the fact that Costco delayed that hike by a couple of years.

“I think there’s been a recognition that in the context of what’s happened more broadly over the last seven years, we stayed true to our principles of really trying to help the member and deliver the value,” he added.

All told, there’s a good chance that Costco will wait at least another five years before raising the cost of its memberships. And it may even go beyond that point. So that’s one worry to check off of your list.

Prices are going down, not up

Costco may have raised the cost of its membership fees. But the company is making a concerted effort to lower prices on the items it sells as part of its pledge to offer members the maximum amount of value.

As Millerchip said, “Our goal is always to be the first to lower prices where we see the opportunities to do so.” And so recently, Costco slashed the cost of key items that include Kirkland foil, olive oil, and baguettes. If you look around the store in the coming months, you’re likely to see even more price cuts.

In fact, you should know that Costco uses its membership fee revenue to offset its costs. And so while you might now be paying $5 or $10 more for your membership, you might notice that the cost of the items you buy is lower in the coming months. Plus, Costco puts select items on sale on a monthly basis. It pays to check the deal books that are mailed out and posted online to see what’s available for less.

Also, you never know when a core item on your shopping list might go on clearance. Look for a price tag ending with the number seven, as that’s generally a sign that you’re getting a much lower price.

Finally, in case you were worried about your beloved hot dog meal at the food court, Millerchip pointed out that the store isn’t looking to change its $1.50 price point anytime soon. The same goes for Costco’s famous $4.99 rotisserie chicken. So for the time being, those two staples are safe.

Don’t stress about Costco price hikes

All told, Costco raised membership fees because it was time for an increase. But that doesn’t mean you’ll face another fee hike soon, or that your shopping list is about to get more expensive. If anything, you might spend less on groceries than in recent months if you shop at Costco.

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Add on the competitive 0% interest period and it’s no wonder we awarded this card Best No Annual Fee Credit Card.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.

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