Is Costco Still Worth It After Your Kids Move Out?
Now that you're only shopping for two, is it time to cancel your Costco membership? We did the math.
Costco has earned its reputation as the go-to store for great deals on quality groceries and household essentials. In fact, members of the warehouse club get such a good deal on what they're buying that a recent Consumer Reports analysis found that Costco has the cheapest groceries out of dozens of major chains nationwide – to the tune of over 20% lower prices compared to Walmart.
But many of the best deals found in the store are on bulk buys. For a big family, working your way through a case of 60 eggs before they expire might be no problem. But once your kids move out and you're back down to a two-person household, there are some groceries that you should never buy in bulk because you just won't be able to use them before they expire.
With the membership costing either $65 or $130 per year, it's important to make sure you're getting enough value to justify the fee. To help you figure out if your Costco membership is still worth it when you have fewer mouths to feed, here's a breakdown of how to calculate the total value of the savings and perks your membership gives you.
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How much do you really save on groceries?
Groceries are about 20% cheaper at Costco than Walmart on average, according to Consumer Reports. Based on that average, you would need to buy approximately $325 worth of groceries per year to break even on a Gold Star membership with grocery savings alone. For the executive membership, when you factor in the 2% cash back earned at that tier, your annual spend would need to hit $591.
While that doesn't seem hard to reach, you have to be mindful about bulk buying perishable foods now that you won't be using them up as quickly. Moreover, Costco prices might be lower on average, but it's not the cheapest option for every item.
To get the exact amount of savings for your household, look at the groceries you typically buy every month and compare the unit price at Costco with that of other chains in your area.
Which items are actually cheaper per unit at Costco? For the ones that are cheaper, tally up the total savings you're getting each month and multiply that by 12 to get a rough estimate of your annual savings.
Costco gas savings can add up quickly
One of the most popular Costco perks is the ability to save on gas by using the members-only gas station outside each Costco location. Prices vary, but warehouse club gas stations are typically somewhere between $0.05 and $0.25 cheaper per gallon than neighboring stations.
In order to break even on the annual fee with gas savings alone, you would need to buy between 260 and 2,600 gallons of gas per year, depending on which membership you have and how much cheaper Costco gas is in your city.
To get a more precise estimate, check the price difference between Costco and the next closest gas station right now and multiply those savings by the number of gallons you expect to buy in a year.
For example, based on past credit card statements, I estimate that my two-person household uses about 560 gallons of gas per year. Our Costco gas station is currently 10 cents cheaper than nearby stations. So, we're saving roughly $56 per year on gas. The actual amount will fluctuate throughout the year, of course. But that's not quite enough to break even on the $65 Gold Star membership on its own.
Factor in other savings you get as a Costco member
The most straightforward way to calculate the value of your membership is with your everyday savings on groceries and gas. But Costco members also enjoy discounts on other products and services. While some of those (like the pharmacy) are perks you don't need a Costco membership to enjoy, others are members' only. So, make a list of other perks you use as a member and estimate how much you're saving.
For example, I get my tires at Costco. My most recent set cost $793 for four tires. That includes a roadside hazard warranty, free flat repairs and free rotations and balancing for the life of the tires.
The same exact tires would have cost $824 at Walmart, plus $18 per tire for the service – plus more to add on lifetime balance and rotation, road hazard warranty and flat tire repair.
So, this set of tires alone netted over $100 in savings for me. That's enough to cover nearly two years of my Gold Star membership even if I never step foot in the store.
Adding the Costco Anywhere Visa card changes the math
It becomes easier to not only break even but profit from your Costco membership when you add the cash back credit card to the mix. The Costco Anywhere Visa card offers 5% cash back on Costco gas, 4% cash back on gas (and EV charging) outside of Costco, 2% cash back on purchases inside the store, and a few other cash back perks.
Calculating the value of this perk is easy as you'll see an updated cash back balance on every monthly statement.
In my case, I signed up for the card last summer and, between gas and groceries, earned $77 in cash back over six months. At that rate, I estimate I'll get about $150 in cash back this year. Those rewards are more than double the $65 membership fee on their own.
Of course, the key with any rewards credit card is to pay the balance in full every month so that you aren't paying interest on your spending. Those interest charges will very quickly erode any value you're getting in rewards.
Is Costco worth it for two people?
A two-person or even one-person household can certainly get value out of a Costco membership, but it really depends on what you buy, what services you use and whether or not you pair your membership with the credit card.
In my case, it's the cash back from the credit card and the other services that really make the membership worth keeping. Without those, the grocery and gas savings alone probably wouldn't be enough to justify the fee, as I would break even at best.
If, after doing the math, you find that you're barely breaking even at Costco each year once your kids are out of the house, it might be time to rethink your membership. If you have the executive membership, for example, maybe downgrade to Gold Star. If you have the Gold Star membership and still are barely breaking even, it might be time to cancel and see how your budget looks when you start shopping elsewhere.
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