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A Costco membership isn’t right for everyone. Here’s how to figure out if you should spend the money on one. [[{“value”:”
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Costco recently reported that a whopping 73 million people are members of its stores. If you keep hearing your friends and neighbors talk up the benefits of Costco, then you may be toying with the idea of signing up for a membership yourself.
A basic (Gold Star) membership at Costco will cost you $60 a year. An Executive membership costs $120, but in exchange, you’ll get 2% cash back on your Costco purchases.
Of course, if you’re new to Costco, it could make the most sense to start with a basic membership for $60 and take things from there. But will that $60 membership actually be worth adding to your budget? There’s a simple way to find out.
Do a trial run
Unfortunately, Costco is not in the practice of offering free trial memberships. But Costco does allow current members to bring guests with them to shop. So if you want to get a sense of what your weekly purchases will cost you at Costco, tag along the next time a friend or neighbor is heading over to the store.
What you’ll want to do ahead of time, though, is make a list of the groceries and household essentials you typically buy on a regular basis. You’ll then want to take note of the prices Costco charges when you accompany your friend to the store.
From there, there’s more work to be done, because you’ll want to compare the prices at Costco to those of your local supermarket. And since Costco tends to sell in bulk, compare unit prices to get true equivalent costs — for example, figure out the per-ounce cost of the breakfast cereal you normally buy at both your regular store and Costco. But once you’ve run those numbers, you’ll basically know if a Costco membership makes financial sense.
Let’s say that you typically buy two gallons of milk, two cases of strawberries, deli meat, bread, cheese, and tortilla chips each week. If the price for all of those items is $45 at your local supermarket but $40 at Costco for the equivalent amount, then you’ve got your answer. Even if you only save $5 on groceries every other week, that’s $130 in savings after a year, which more than justifies the $60 cost of a membership.
And remember, once you join Costco, you’ll be privy to great prices on items you probably don’t buy every week, like clothing and electronics. So even if your weekly savings aren’t that substantial, you should know that a discount on a single big-ticket item might cover the cost of your membership fee. For example, if your high schooler needs a new laptop and you find one on sale at Costco for $499, while the cheapest price elsewhere is $599, that $100 in savings more than makes up for your $60 membership fee.
There’s little risk involved
It’s definitely a good idea to compare the cost of your regular purchases at the supermarket to what Costco charges. But you also shouldn’t stress too much about your membership not paying off.
If you find that to be the case, you can always cancel and get a refund. And to be clear, you’ll get a full refund, even if you’ve used your membership for a month or so before deciding you don’t want to keep it. So all told, if you’re on the fence about Costco, it could pay to join since there’s little financial risk involved.
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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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