Please ensure Javascript is enabled for purposes of website accessibility

4 Reasons to Not Renew Your Costco Membership

By Daniel B. Kline – Updated Apr 15, 2019 at 1:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The chain can save you money -- but only if you use your membership.

Costco (COST 2.98%) usually hovers around a 90% member retention rate. It's easy to justify spending $60 for a Costco Gold Star membership, or even $120 for an Executive card, which comes with the promise of cash back; either membership feels like a passport to savings, an admission ticket that opens the door to a club full of values.

That's true, of course, but it's only part of the Costco story. Your membership can be a way to save money -- but it can also be a big waste of money. For many people, joining the warehouse club makes sense, but there are reasons why you should not renew your membership.

The parking lot of a Costco warehouse is packed.

Costco offers the opportunity to save money, but that's not always how it works out. Image source: Getty Images.

1. You just never go

I've had a Costco card in my wallet for the past few months, and I've used it exactly once. That's because even the closest location isn't all that close to where I live.

When I joined the club I assumed I'd find reasons to visit regularly. In reality, the promise of saving has not been enough to justify the roughly half hour drive, so, at least so far, my membership fee has mostly been wasted.

2. You're impulsive

The merchandise at Costco changes regularly. You might find a deal on winter coats on one visit, and a sale on pool accessories the next. If you're the type of person who buys a kayak because the price seems really good -- even though you don't live near a body of water -- then a membership may be a bad idea for you.

3. You're picky

Costco has a limited selection when it comes to food. It has a handful of kinds of cereal, for example, when a regular grocery store might have dozens of choices.

If you're very selective about the brands you buy, a warehouse club may not be right for you. Saving money at this type of store requires a bit of flexibility and being willing to buy whatever brand happens to be on the shelf.

4. You're a Prime member

Warehouse clubs offer good prices, but they're not all that much better than those offered by Amazon (AMZN 1.20%). If you already have an Amazon Prime membership, which offers unlimited free two-day shipping, it may not be worth it to spend the extra money to join Costco.

Yes, you might save a few pennies more, but you would be paying an extra membership fee for a smaller selection at a store where you have to buy in large quantities. That's probably not worth it for most people.

Check out the latest earnings call transcript for Costco.

Use it or lose it

Joining Costco offers more than just low prices. It's also fun (for some people) to see what the chain has on each visit. That's a form of entertainment that helps justify the cost of a membership for many people.

If you use your Costco membership on a monthly or better basis, it may be worth it even if the numbers don't quite work out (or you're OK with sometimes ending up with a tub of something you don't really need). Deciding to join or renew should factor in both the potential savings you will reap and the other benefits you get -- things like cheap meals in the food court, travel benefits, and other services. Once you understand the full picture, you may decide that the cost for "saving" money is actually too high.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$480.30 (2.98%) $13.90
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$115.15 (1.20%) $1.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.