Will a Costco Membership Save You Money or Cost You Money? Here's How to Find Out

Thinking about joining Costco? Before you pull the trigger and break out your credit cards to pay the membership fee, it's worth taking the time to think about whether joining the club will cost you or save you money in the end.

It can be hard to determine which way things will go, but asking yourself three key questions can shed light on whether paying to become a Costco member is worth it or whether you'd have more money in your bank account if you steered clear of the warehouse club.

1. Will you shop at Costco enough to justify the membership fee?

The first big question is whether you'll shop often enough at Costco to justify the upfront cost of joining.

Costco has two tiers of membership, with the entry-level Gold Star membership coming in at $60 a year and the upgraded Executive membership costing $120 a year. If you spring for the basic membership, you would have to save at least $60 a year by shopping at Costco compared with your local grocer or other stores you may already be shopping at.

A $60 per year annual membership fee comes to $5 per month. If you can save at least that much on gas or groceries by shopping at Costco compared to other stores, then your membership will save you rather than cost you. If you're buying gas at Costco at least twice a month, or spending enough to save at least $5 per month, then chances are good you'll more than cover your upfront fees.

2. Will you be tempted to overspend at the warehouse club?

Consider whether you're likely to overspend on splurges or unnecessary items.

Costco is designed in a way that encourages you to spend on things you didn't plan on purchasing, with essentials kept in the back and splurge items kept front and center. And its strategies work, with Reddit users impulse-buying everything from inflatable hot tubs to apple trees.

If you buy unexpected and unnecessary items when you go to Costco, you'll negate any savings that come from the store's good deals and you'll likely end up spending more. You can't overcome this problem by shopping online either, as Costco charges higher prices on its website than in-store. Plus, not everything is available online.

So, if you know you're the type of person who will find yourself going for coffee and coming home with a boat, you should not join Costco.

3. Will you end up tossing bulk items in the trash?

Finally, you should know Costco sells bulk versions of most items. And, if you buy something big but can't use it up before it goes bad, you've wasted your money instead of getting a deal.

Say, for example, you opt to spend $12.49 on Special K Cereal from Costco, ending up with 43 ounces. Or, you could spend $4.48 on a 16.9-ounce box of the same cereal from Walmart. If you only need 16.9 ounces of cereal, you'll be much better off with the Walmart deal.

By considering whether bulk purchases make sense for you, as well as thinking about your tendency to buy impulse items, you can make an informed choice about whether a Costco membership will save or cost you money. You need to think about this issue before you sign up for a membership and end up with less money in the bank.