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Costco hasn’t raised membership fees in six years. Is a change coming? Read on to find out.
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If you’ve ever marveled at the amount of savings you’re able to enjoy by shopping at Costco, you should know that a big reason the warehouse club giant is able to offer such competitive prices is through its membership fees. It’s revenue from those fees that allows Costco to pass savings onto customers in the form of low-cost groceries, household essentials, and a host of other items.
Right now, a basic Costco membership costs $60, while an Executive membership costs $120. The upgraded membership gives you 2% cash back on all Costco purchases, while a basic membership does not.
But there’s been talk of a Costco fee hike in recent months, and for good reason. The last time Costco raised its membership fees was June 2017. Back then, the cost of a basic membership increased from $55 to $60, while the Executive membership fee rose $10 from $110 to $120.
Prior to 2017, Costco raised membership fees in 2011. So the cadence for fee hikes seems to be around every six years or so. At this point, we’re beyond six years since Costco last increased the cost of memberships. And that’s why customers need to brace for an upcoming fee hike. The question is, when will it happen?
A matter of when, not if
At some point, Costco is going to raise the price of a membership. This is something the company’s CFO, Richard Galanti, confirmed earlier this year on a company earnings call.
Specifically, when asked about a fee hike, Galanti said, “In our view, it’s a question of when, not if.” However, Galanti followed that up to say, “But keep in mind, that’s one way that we become even more competitive.”
And that’s an important distinction. While some people may not be happy with the idea of a Costco fee hike — especially at a time when living costs are still elevated — the reality is that charging customers an extra $5 or $10 a year could allow Costco to maintain its vast inventory of goods at affordable prices. So even if you get stuck paying a slightly higher membership fee for Costco access, chances are, you’ll more than make up your money in the form of savings.
Now to be fair, we don’t know what sort of fee hike Costco will implement during its next go-round. But based on previous hikes, we’re probably looking at a $5 increase for a basic membership and a $10 increase for the Executive membership. So if you have a basic membership and you shop at Costco weekly, a $5 increase would mean paying an extra $0.10 a week to walk in the door.
Is a fee hike coming in 2023?
That’s really the big question. And we may have a better answer in late September, since that’s when the company is scheduled to next release earnings.
But whether Costco raises its fees in October, November, December, or beyond, the reality is that a membership will probably still be worth paying for. So all told, if you’re getting great value from Costco now, a modest increase to your membership fee probably isn’t something to lose sleep over.
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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 and Gala. The Motley Fool has a disclosure policy.
