Penny Wise and Dollar Foolish-Part 5

Are you penny wise and dollar foolish by ignoring Costco because of annual fees?
I remember a few months ago listening to some online discussions on why some shoppers don’t like Costco and two things resonated with me.

Many consumers voiced their frustration because Costco requires a membership for shoppers and some online comments suggested one should not have to pay to shop at any store.

Penny Wise and Dollar Foolish from Schwarm Images

If you spend $200 per month at Costco, your annual reward will be roughly $48. If you spend $400 per month, you qualify for about $96 for your annual award. In other words, if you spend about $100 per week, that pays for your annual membership.

When you purchase furniture or electronics or another big-ticket item, that adds up fast. For example, if you purchase a $1500 HDTV or a $1000 laptop, these amounts could take care of 30% of your annual membership fee. Online purchases and alcohol too can be added to this category.

In addition to the 2% savings, you save another 1% off all transactions at Costco and elsewhere. This means essentially that if you use your AMEX card while at Costco, your per month expense would be $280 per month which would completely cover the Executive Membership of $100 annually.

I think it might premature to completely exclude Costco from the buying club or inexpensive retail store discussion because of their membership fee. Many whom try Costco for the first time realize that it works out to be a good value in the end.

SECOND, some of the online commenters mentioned Costco products might not be the cheapest. My first question, how do you define cheap? If you define it as an inferior product, then yes, why shop at Costco because that’s doesn’t appear to be their business model. If you define “cheap” or “inexpensive” as “a good value” then maybe you’ve found retail nirvana. When you focus on value, consider focusing on Costco.

If your only goal is lower prices, Costco may not be your store. Leave that to other retailers. If value is your only goal, indeed, consider Costco.

Although it’s dangerous to shop strictly on price, often, that’s what many consumers do. It might be penny wise and dollar foolish to strictly shop on price. Maybe not today, or tomorrow but maybe in the end.

One could argue that you are not being penny wise and dollar foolish by excluding the Costco model from the picture. Technically, they may be right. The key point here value and saving money. If you want to stretch your money as far as possible and are interested in quality goods for the most part, Costco should be a play.

Paid Executive Membership 2% Reward

Monthly (2%)           Yearly               Approximate                  Monthly (2%) & Purchases                  Purchases        Annual Reward             1% using AMEX

$200                             $2,400                  $48                                   $72

$300                             $3,600                  $72                                   $108

$400                             $4,800                  $96                                   $144

$600                             $7,200                  $144                                 $216

$800                             $9,600                  $192                                 $288

$1,000                          $12,000                $240                                 $360

$2,100                          $25,000                $500 max.                        $750

FIRST, are these commenters aware of the 2% rebate Costco offers if you choose the Executive Membership? In addition, are they also aware you could receive another 1% discount if you pay with your Costco American Express card? Yes, the membership is $100 annually but let us unpeel the onion and take a closer look.

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Kevin Schwarm

I have over 25 years of professional experience in business, information technology (IT), and customer service. Industry experience in retail, medical insurance, higher education, non-profit, financial services, and property and casualty insurance. Customer focused professional interested in providing value (save time, money and aggravation) by evaluating and analyzing information, services and products with a unique perspective.

12 Responses

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