Some People Hate the Idea of Paying for Costco Access. Here’s Why I Don’t Mind One Bit

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It costs money to be able to shop at Costco. Read on to see why this member isn’t bothered by that. 

Usually, buying groceries or household essentials is a simple matter of driving to the supermarket, walking in, loading up a cart, and paying on your way out. You don’t need to show an ID or membership card at the door.

But Costco works differently. Costco charges a fee for access to its network of warehouse club stores. And for some people, that fee may not be worth paying.

Right now, a basic Costco membership costs $60 a year, while an Executive membership costs $120. The Executive membership costs double because it also gives you 2% cash back on Costco purchases. So if you run the numbers, you’ll see that if your annual Costco spending exceeds $3,000, it pays to upgrade to the Executive membership.

Some people I know refuse to join Costco because they think it’s ridiculous to have to pay a membership fee to get access to a place that, in turn, takes your money. I can see their point. But here’s why I don’t mind paying for a Costco membership one bit.

I more than make up that money

Costco is a business, and rest assured that it makes plenty of money on its membership fees. Last year, in fact, it raked in over $4 billion.

But Costco doesn’t just take the fees it collects and add that money to its balance sheet. Rather, Costco uses those fees to help offset its operating expenses. And the warehouse club giant then passes those savings onto consumers in the form of lower-priced goods. So if you’re someone like me who shops at Costco often, you might easily make back your membership fee and then some.

Now, the amount of money I save by shopping at Costco can vary based on the season, and based on the specific items I’m purchasing. But on average, I’d say I save about $15 to $20 each time I visit Costco when I compare the cost of buying groceries and essentials there to what I’d spend at my local supermarket.

Meanwhile, I shop at Costco almost every week. So if I’m saving $15 a week (the lower end of my estimated range) 50 times over, I’m spending $750 less on the items I need to put food on the table and keep my household running. Subtract the $120 I pay for my Executive membership, and I’m still up $630.

It’s a matter of how you’ll use your membership

I know some people who pay for a Costco membership and only visit the store a few times a year. Is that membership fee worth paying for them? Maybe, but maybe not — it depends on how much they’re purchasing each time they go and how much they’re saving.

If you don’t expect to visit Costco often, then you may be put off by the idea of spending $60 (or $120) on a membership, and understandably so. And in that case, it may not make sense to join.

But here’s one thing you may want to do before you make your decision. Tag along with a friend who has a Costco membership and jot down the cost of the items you buy on a regular basis. Then, compare those prices to the prices at your local supermarket. If there’s the potential to save a notable amount per visit, and you think you’ll get over to Costco often enough to make back your membership fee, then it could be worth it to join.

Remember, too, that Costco will allow you to cancel your membership at any time for a refund. So if you pay that fee in March and, come June, you haven’t really been able to get out to Costco, you can cancel and ask customer service for your money back.

It’s true that most stores don’t charge you a fee for the ability to go in and spend money. But that’s the way Costco’s business model works. And when you’re saving as much as I am, forking over that fee isn’t bothersome.

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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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