Is Costco Worth the Membership Fee?

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My brother recently paid me a visit and while he was out here, I told him about my plans to buy a large wooden play set for our backyard so our daughter and her friends can have a place to play without us having to trek across town to the nearest playground. I’ve been researching…

My brother recently paid me a visit and while he was out here, I told him about my plans to buy a large wooden play set for our backyard so our daughter and her friends can have a place to play without us having to trek across town to the nearest playground. I’ve been researching the play sets and so far I’ve found some nice models at Menards, Lowe’s and Home Depot. The first question my brother asked me was if I had a Costco membership.

Nope. Didn’t have one.

Costco Logo
My first experience with Costco

So we hopped in the car and he took me to Costco for my first visit. My perception of warehouse clubs is based upon my childhood experiences of visiting Sam’s Club with my parents. I was one of four children, so buying in bulk was both convenient and cost effective way for my family to shop for many items.

My wife and I are the parents of two very young children and we aren’t at the stage where we buy much in bulk. So I put the notion of joining a warehouse club on the side burner – that could wait until our children were older and we “needed” that 5 lb bucket of peanut butter and the 150 ct. package of frozen pops (you know the ones in the little plastic packages? I grew up eating those!).

But I decided it would be fun to check out  Costco and see if they had a play set that would meet our needs.

Big Packages, and Big Savings

Costco had a nice play yard, but it was much bigger than my wife and I were looking for. But I didn’t want to waste the trip, so my brother and I spent the next 45 minutes walking around the store and checking everything out. He showed me a lot of the items he and his wife buy when they go to Costco, and how it saves them money.

For example, they buy a large cut of pork that has tenderloin, chops, and a roast in one package. It isn’t already butchered, but it’s a lot less expensive than the cuts at the supermarket. If you have a sharp knife and can follow the directions on the back of the package, you can get five or six meals out of that package – which costs about 2/3 of the supermarket price.

Do you have children still in diapers? If you aren’t using cloth diapers, then you need to check out the diaper prices at Costco. They are consistently cheaper than most other stores. Sure, they only sell them in packages of 200 or so, but if your child isn’t going to outgrow his diapers soon, you can save a lot of money. These are rough prices and diaper counts (I didn’t take exact notes), but the Kirkland Brand (Costco’s signature brand) of diapers was around $30 for 216 disposable diapers. Huggies were around $36 for 228. (From what I understand, prices and availability can vary by location). The only place I’ve seen that sells diapers at a comparable savings is when you buy them via a subscription through Amazon Moms.

Kirkland brand paper towels and toilet paper are among Costco’s biggest sellers – both of which rang in at roughly 33% cheaper than the comparable national brands. Note: Toilet Kirkland brand toilet paper is actually Costco’s #1 selling item – they sell over a billion rolls a year – over $400 million worth.

Here is an excerpt from a recent CNBC special on Costco:

You Never Know What You’ll Find…

One of the small problems with Costco is also one of the things that makes it unique: you never quite know what you will find there. Costco is able to sell items at lower costs for several reasons: they buy in massive quantities and enjoy economies of scale, they don’t stock as many items as many supermarkets and department stores (less money tied up in inventory), they operate on more limited hours than most other stores (69 hour weeks), and they don’t spend much in the way of furnishings or displays – it’s a warehouse with items placed on large shelves, pallets, coolers, etc.

But it works. Costco is able to pass on a lot of savings to their customers, and still enjoy a healthy profit. Check out their stock ticker for more info on their company – COST.

Is Costco worth the membership fee?
Is Costco worth the membership fee?

Costco also offers more than bulk groceries and related items – the warehouse by us has furniture, home and garden, electronics, a pharmacy, clothing items, small appliances, an optical center (eye exams and glasses), tires, wedding dresses, jewelry, vacation plans, car buying service, and more. They also contract with local businesses and contractors to offer savings on other items, such as air conditioner installations/repairs, painting, and similar home improvements. They also have an online store, where you can find items they don’t carry in their warehouses.

How Much Does a Costco Membership Cost?

Costco and other warehouse clubs have one thing in common: you need a membership to shop there. In fact, the membership fees is one of the primary profit drivers for Costco (with hundreds of thousands of members, that translates into millions of dollars of profit).

There are three membership levels:

  • Gold Star Membership ($55) which is a basic household membership with two cards, the
  • Business Membership ($55) which inclues two cards, and the option of adding more cards to your membership, and the
  • Executive Membership ($110), which comes with two me.

Each of these membership plans comes with two membership cards, and the business card has the option of adding additional members to your plan at the rate of $55 per two cards. You don’t need to be a business owner to apply for the Business Membership; many people get that card so they can add family members to their membership. The other benefit of the Business Membership is the ability to purchase items at wholesale, so you can avoid paying tax on the purchase if you plan on reselling it.

The Executive Membership is twice as much as the other two membership plans, but it pays a 2% annual reward in the form of a Costco credit. So you would need to spend $2,750 over the course of the year ($229/mo) to break even on the Executive Membership (there are a few other small benefits including additional savings on certain purchases or services, but the rewards is the big one).

Is it worth it?

There are several ways to look at a membership. If you run the numbers, you will see that all you need to do is save $5 a month by shopping at Costco to pay off the membership fee. But the savings can go far beyond that – provided you don’t change your shopping habits too much and spend more than you otherwise might.

CNBC recently did a special on Costco and they ran the numbers on the big warehouses:

According to a Consumers’ Checkbook survey published by the not-for-profit Center for the Study of Services, BJ’s prices were on average 29 percent lower, Costco’s 30 percent lower, and Sam’s 33 percent lower than the largest supermarket chains. The survey found that a family that spends $150 a week at a conventional supermarket could save $2,270 a year when shopping at BJ’s, $2,344 a year when shopping at Costco, and $2,571 when shopping at Sam’s Club.

Of course, you have to buy the right items to make those numbers work – but with those savings, it’s not difficult to pay off the annual membership fee at Costco or the other warehouse stores. And these savings are just on groceries. If you buy other items, you can easily hit the $2,750 to make the Executive Membership worth it.

Payments Accepted by Costco

One more important thing – Costco doesn’t accept all forms of payments. They accept cash, checks, VISA or MasterCard debit cards, or American Express credit cards. Take note of that again – they don’ accept VISA or MasterCard credit cards – only debit cards.

Costco also accepts the American Express True Earnings Card from Costco, which is a co-branded credit card that will also double as your Costco membership card. It offers special cash back when shopping at Costco, including 3% on their gas – which is consistently $0.10-$0.20 cheaper per gallon than most other gas stations in our area (yet another reason to join!).

I thought about getting the American Express True Earnings Card from Costco when I got my membership, but I already have the American Express Blue Cash Preferred Card, which is accepted at Costco, and offers better cash back on purchases made elsewhere, so I’m keeping my current card for now.

Verdict – Big Savings at Costco

Overall, I was impressed enough with Costco that my wife and I decided to join the club, and we’re now card-carrying members of Costco. I think we will save a lot of money there in the long run, but we will also need to adjust the way we shop for certain items. It makes sense to buy essentials like toilet paper and paper towels in buk, but some items, particularly perishable items, are best bought as needed.

I should also note that we have a Costco reasonably close to where we live, and shopping there isn’t out of our way and doesn’t force us to drive a cross town or change the way we shop (I’ve know people who were members of warehouse clubs that were located close to an hour away, so when they went shopping there, they would “load up” and probably spend more than they might otherwise have).

Do you belong to any membership warehouses, such as Costco, Sam’s Club, or BJs? Do you think they are worth it?

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Nicole says

    Just to clarify, the 2% cashback is NOT a store credit. You can go to the membership desk and they’ll give you cash for the amount of your check. Also, it is wise for everyone to get an executive membership (assuming they can afford the higher fee) because Costco will give you the difference in cash if your 2% cash back doesn’t amount to more than the difference of the regular membership and executive membership. So if your rebate check isn’t at least $55 they’ll give you the difference.

    On a separate note, I’m single and do a good majority of my shopping at Costco for food and other things. I find that a lot of their fruits and vegetables are cheaper than my regular grocery store.

    • Ryan Guina says

      Hi Nicole, thanks for the clarification. They explained the part about making up the difference in your annual cash back if you don’t reach the $55 threshold, but I couldn’t find that in their terms online, so I didn’t mention it. I even asked the associate about it and she verified it, then went on to say that a lot of people don’t do it anyway, even though it is a no-lose proposition!

      I wasn’t aware the check could be cashed out, I thought it was for store credit, but cash makes it even better! (though I would probably spend it there anyway, so it’s a wash for me).

      Thanks for the comments, Nicole!

      • Bryan says

        My wife and I are members, and we forgot about the cash back if we don’t hit the $55 threshold. Fortunately, a buddy of mine works there, and he reminded me. It’s nice to get money back that you forget about!

        • Ryan Guina says

          I think it’s awesome that Costco makes up the $55 if you don’t reach that mark. It’s a no-brainer to sign up for the Executive Membership when you think about it in those terms.

  2. Trey says

    Even when it was just my wife and I – the cost of the membership at Costco was worth it. Our membership expired this month and we are in the process of evaluating if we should switch to Sam’s Club and will doing some comparison shopping this weekend for the core items we use.

    • Ryan Guina says

      It appears as though I decided we didn’t need a warehouse membership based on assumptions rather than facts, as I’ve spoken with a few singles and couples who use Costco or Sam’s Club, and don’t have any children. I’m a little late to the party, but I’m glad I made it!

  3. PK says

    Thanks Nicole for pointint out the items I was going to clarify.

    Yes, they make up the difference – I’ve used it.
    Yes they cash the voucher for you, then I charge that visit on my Costco Amex to get the 3% again (2% in dividends and 1% on the card). So it’s just better than a wash.

    • Ryan Guina says

      Great point, PK. I’ll cash the voucher as well. I use an AmEx card there too, plus I hve the Executive membership, so you’re right, the 3% cash back is much better than just using it as payment!

  4. The-Military-Guide says

    Great post, Ryan!

    Maybe you could give this info a second run on your military blog.

    Our Oahu Costco is the island’s #1 gas seller, and their prices frequently beat the military base’s gas stations.

    We also price-shop between Costco and the commissary. Costco usually wins on items like vitamins, antihistamines, supplements, protein bars, frozen dinners, bulk fruits & veggies (if you can eat them fast enough), oatmeal, and some cereal brands. Now I’ll have to check their toilet paper prices. The commissary frequently responds to Costco’s moves, so we keep track of both pricebooks.

    Our Fidelity American Express 2% rewards card is good at Costco, of course, so we now use that card more than any other.

    • Ryan Guina says

      Thanks for the compliments, Nords. Interesting to hear that Costco beats the Commissary in many instances. The only time I ever shopped at the commissary was when I was stationed in the UK. Once I made it Stateside, I worked irregular shifts and never seemed to be up and about when our commissary was open (I worked mid shift, and our base commissary had limited hours). So I did most of my shopping at the Super Wal-Mart because they had the hours that suited me best.

      It seems as though I’ve been missing out on a good thing with Costco. Looks like I should have joined sooner!

  5. Sun says

    You do not need a Costco membership to shop at Costco. The pharmacy and food court is always free. You can also have your cousin by Costco gift cards ($25 increments via You can use the Costco gift card during checkout and pay with your debit card (PIN only). I know $55 is not a lot to pay for the year, but we don’t shop there enough to justify the membership, but can still utilize it by having a stack of Costco gift cards. We found high quality fruits, vegetables, and deli items at extremely good prices. Soft drinks you can find better pricing with local sales, but for every day prices, I think they are competitive.

    • Ryan Guina says

      I wasn’t aware that you could shop at Costco with only a gift card. If that is the case, then you might want to check out a gift card reseller. You can often buy Costco gift cards there for 2% off face value, which is a great deal, and you can save more by using your cash rewards card.

      Also – good point on the soft drink prices. The way Costco prices everything is either 14% or 15% above cost, but they don’t sell things as loss leaders, which many other stores frequently do (loss leaders are when stores sell items at or below cost in order to undercut the competition and get people in the doors; they know they will make it up on other sales). Costco prices everything in such a way that it is great to shop there everyday, regardless of which sales are going on. It’s a great business model.

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