When my wife lost her job last year, we considered a Costco membership because we starting eating at home more often. Costco built their business on selling products in bulk to their customers, but we weren’t sure if it was worth it for a couple. Their annual membership fees are $55 for the Gold Star level and $110 for the Executive level. If we signed up, we wanted to be sure these fees would pay for themselves through savings.
How Much Do We Spend?
The first step was to calculate how much we spent on groceries annually. After looking through some old credit card statements, I realized we spent about $300 per month. Over a year that’s about $3600, which is close to the $3838 American families spent eating at home last year. This number is based on an average family of 2.5 people and comes directly from the 2011 consumer expenditures report on the BLS (Bureau of Labor Statistics) website. If you consider purchasing other Costco products like apparel, office supplies, or electronics, your reward could be even greater.
Doing the Math
With the Gold Star membership, you’re allowed to shop in the store and receive some additional benefits. However, at the Executive level you receive a 2% percent annual reward up to $750 on most Costco purchases.
– $110 (Executive Membership)
+ $72 (Annual Reward on $3600)
– $38 (Total Annual Cost)
Choosing the Executive membership gave me the benefits of the Gold Star level plus a $38 annual cost. In larger families, the annual rewards potential can exceed the entire membership fee.
Automotive Services – Depending on location, Costco’s available automotive services can range from auto insurance to custom wheel installation. They also have gas stations with prices that are usually lower than the local competitors.
Costco Coupons – The savings of buying in bulk are already reflected in their prices. However, when they offer in-store and manufacturer coupons it compounds the savings.
Customer Return Policy – The Costco return policy revolves around a customer’s satisfaction with the product. No receipt is required for a full refund, but it is limited to 90 days for many popular electronics like televisions, cameras, computers, mobile phones, etc…
First and foremost, a Costco membership is only worth considering if the location is convenient, you have a need to buy in large quantities, and grocery prices are comparable with other local markets. That being said, we chose to pay the extra for the Executive membership after adding toiletries and clothes to our annual Costco expenses. The annual reward really pays off during holidays and large family gatherings.