Does ‘Free’ Shipping Really Save You Money? Probably Not

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The word “free” doesn’t always mean what you think it does. 

Online shopping surged in popularity during the pandemic, when consumers were worried that shopping in person would expose them to unwanted germs. And these days, many consumers do the bulk of their shopping online — not due to health-related concerns, but due to the convenience factor. After all, why force yourself to drive 20 minutes to the nearest mall or big-box store when you can order the things you want from the comfort of your couch and wait for them to show up at your door?

Another reason online shopping holds so much appeal is that many retailers offer free shipping on purchases, so there’s little downside to skipping an in-person shopping trip. In fact, you can even argue that online shopping is cheaper than in-store shopping because that way, you’re not paying for gas.

But is free shipping actually something that saves you money? Or are you secretly paying the price?

Is “free” a misnomer?

Most major retailers offer free shipping on online purchases. This means that you can complete an order and check out without incurring a separate shipping charge on your credit card. But while you may not be charged a separate fee for shipping, you might be paying for that shipping in other ways.

Retailers aren’t in the business of losing money. And so in exchange for free shipping, they might instead raise the prices of the items they’re selling to make up the difference. So all told, you may not end up saving money.

It’s similar to credit card processing fees. Some retailers pass those onto consumers directly by adding, say, 3% to their bills if they pay by credit card. Other retailers might claim to cover those fees instead. But in reality, what they’re probably doing is just baking those fees into the cost of the items they’re selling and charging more for them.

You might have to spend more for free shipping

While it’s true that most big-name retailers offer free shipping for online orders, you’ll usually have to meet a certain threshold to avoid shipping charges. Amazon, for example, offers free shipping for orders of $25 or more.

But what if you only want to buy a $10 item? In that case, you may just decide to spend an extra $15 to get free shipping. But are you saving money in that case? No.

Of course, it’s easy enough to snag free shipping on Amazon by getting a Prime membership. But that comes with a price tag of $139 a year. So while it allows you to get free shipping on a $4 item, you’re paying for that privilege via the annual cost.

Similarly, Target and Walmart offer free shipping for online orders totaling $35 or more. But if your average purchase on those sites only amounts to $25, and you’re constantly forcing yourself to buy extra things to meet that $35 minimum, then you’re not coming out ahead financially.

All told, few things in life are free, and it’s fair to say that shipping falls into that category. You may not have to pay a shipping fee when you shop online. But rest assured, you’re most likely paying in a less obvious way.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com and Target. The Motley Fool has positions in and recommends Amazon.com, Target, and Walmart. The Motley Fool has a disclosure policy.

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