Costco Made Over $4 Billion in Membership Fees in 2022. Here’s Why That’s a Good Thing

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Don’t get mad at Costco for raking in the fees. 

If you’re a Costco member, you’re no doubt aware that it costs money to be able to shop there. Currently, a basic Costco membership costs $60, while an executive membership has a $120 price tag. But with an executive membership, you get 2% back on your Costco purchases, the same way you might get 2% cash back by swiping a credit card at a gas station or grocery store.

Now, there’s talk of Costco raising its membership fees in the near future, namely because it hasn’t done so since June 2017. And that may not sit well with some members.

Meanwhile, you may be curious to know how much money Costco makes on membership fees. The answer? A lot.

Last year, in fact, Costco made more than $4 billion in membership fees. And clearly, that’s not a small amount of money.

But rather than begrudge Costco that revenue, you should actually be thankful for it. Here’s why.

What Costco fees do

Costco charges members a fee to help offset its operating costs, and to also offset the cost of procuring inventory. You’ve probably noticed that Costco’s prices tend to be quite competitive, whether you’re buying groceries, household essentials, or gas. The reason Costco is able to offer such low prices is that it takes in enough revenue from membership fees to do so. If Costco were to lower its fees, it would probably have to raise the price of the goods it sells.

Is your Costco membership worth it?

You may be at a point where you’re tired of paying a membership fee to access Costco. If that’s the case, you’ll need to ask yourself whether it’s worth it to keep paying for the privilege to shop there.

A good bet is to think about how often you shop at Costco and how much you save, on average, per visit. Let’s say you shop there once a month and save an estimated $20 on your grocery bills when you do. Even Costco’s more expensive membership is much less than $240, which is the amount of savings you’re looking at in this example. So in that case, keeping your membership makes sense.

But if you only shop at Costco a couple of times a year and save $20 per visit, well, then it may be time to rethink your membership. Ultimately, a good bet is to look at your credit card statements from last year and see how often you visited Costco. Then, pay attention to your savings on your next visit and figure out from there whether it makes sense to renew your membership.

And if you’re not sure what your savings per visit look like, keep your next receipt from Costco and then compare prices with what your neighborhood supermarket charges. You may need to bust out the calculator on your phone to adjust for differences in quantity and figure out unit price, but it’s important to run those numbers — because while a Costco membership makes sense for a lot of people, it may not actually make sense for you.

What’s more, it’s a good idea to make sure a Costco membership makes sense now, before the cost of one increases. We don’t know when that’s going to happen, but there is a chance it’ll be sometime in 2023.

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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 no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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