Sunday, August 20, 2017

How our new Costco membership paid for itself

Over the past few years, I've had a sort of off-and-on flirtation with Costco. It started in 2012, when I went on a trip there with my in-laws and noticed several things we buy regularly, like organic sugar and Fair Trade coffee, on their shelves at prices much lower than we usually pay. I was intrigued, but not really convinced that we'd save enough just on those few items to offset the $55 annual cost (at the time) of a membership. And when I later discovered that I didn't really like the Costco coffee anyway, and that I could get an even cheaper sustainable brew at IKEA, that seemed to settle the question.

However, one lesson I've learned in my ecofrugal life is that value, like everything else, changes over time; what's a good deal this year may not be a good deal next year, and vice versa. (A case in point: when I first compared the long-term costs of LED light bulbs to older CFLs, I found there wasn't enough savings there to make it worth switching. However, in the years since, the price of LEDs dropped sharply, changing the equation and convincing me to spring for my first LED bulb last year.) So, in a similar vein, I've revisited the idea of joining Costco from time to time to see if there were any new developments that would make it a good deal for us after all.

Up until this year, the answer was always no. A 2014 article on "9 Items that Will Single-Handedly Pay for Your Costco Membership" piqued my interest, but a quick analysis of the list convinced me that none of these items really applied to us. Either the we could find better deals on the item in question elsewhere, or it wasn't something we were likely to buy in the first place. And while the comments section below that article outlined several other Costco deals that we thought we might have a use for some day, such as the car-buying and car-insurance programs, none of them were immediate needs, so there was no way they could justify the membership cost for us.

All that changed last month, when Brian went to the eye doctor and was told he had passed through the Great Gate of Middle Age: it was time to switch to progressive lenses. Although this doctor's office also makes and sells glasses, we knew from past experience that filling the prescription there was likely to be very expensive; the last pair he bought from an independent optician came to nearly $400, and that was for single-vision lenses. So we started looking into other options, and this report from Consumer Reports (summarized here at ClarkHoward.com) tipped us off that Costco was the best overall, with good service and prices less than half what the independent shops typically charge. (Online retailers, like Zenni Optical, were still cheaper, but their service was poor—and Brian was reluctant to entrust a complicated prescription to an online seller, where he couldn't try the glasses on and deal with any potential problems right away.) If we bought his glasses at Costco, the savings on this one purchase would more than pay for the $60 cost of membership, and anything we managed to save on groceries over the course of the year would be pure gravy.

Being cautious, we made a point of slipping into the Costco optical department first (which you're allowed to visit without being a member) to check the cost of the glasses. Once we'd confirmed that they would be about $180—less than half what we could expect to pay at the doctor's office—we went round to the membership desk, where we were offered two choices. We could get the basic membership for $60 a year, or the "executive" membership for $120, which would give us 2% cash back on all purchases at Costco. My instinct was to stick with the regular membership, since I doubted we'd get enough in benefits to pay for the extra $60, until the clerk told me the kicker: the rewards would be paid out in the form of a yearly check, for which the minimum amount would be the $60 we'd paid. In other words, if we didn't earn enough in rewards to offset the $60 annual fee, Costco would refund it. This meant the worst we could possibly do was break even—which pretty much made the deal a no-brainer.

She then offered us the option of also signing up for the Costco credit card, which would double as our membership ID and give us an array of perks:
  • An additional 2% cash back on all purchases at Costco (on top of the 2% from our Executive membership);
  • 3% for restaurants and travel purchases;
  • 4% on gas—not just at Costco, where the lines are usually so ridiculous that we aren't even tempted by the low prices, but everywhere; and
  • 1% cash back everywhere else.
We hadn't really been in the market for a new credit card, but it didn't cost anything extra with our Costco membership, and the benefits—especially that 4% on gas—looked better than any of our current rewards cards. So we figured, once again, we had pretty much nothing to lose.

So, having signed our pledge of loyalty to Costco, at least for one year, we set out to explore the store and see what kind of deals it had to offer. And the answer proved to be: some great, some pretty good, and some disappointing. For a lot of items on which Costco is reputed to offer great deals, like toilet paper, we found it couldn't touch the prices we're used to getting at Trader Joe's. Its prices on organic chicken legs were just a tiny bit less per pound, but they required buying four or five pounds at once. However, we also discovered a few bargains that actually looked like they could be worth the trip, such as:
  • Organic sugar. We've long been in the habit of buying organic sugar at Trader Joe's for $1.75 per pound. Just in the past couple of months, we were surprised and pleased to find it at Aldi for $1.45 per pound. But Costco blew that price out of the water, offering 10-pound bags for $7.99—a mere 80 cents a pound. With regular sugar at about 50 cents a pound, that means sugar no longer needs a special exemption to the rule of 1.6.
  • Organic raisins. Costco undercut Trader Joe's on organic raisins as well, offering a 4-pound box for $9.49, or $2.37 per pound. That beats the $2.99 we pay per pound at TJ's, and with less packaging waste as well.
  • Olive oil. A 5-liter bottle of Filippo Berrio olive oil (not extra-virgin, just the cheap stuff) was $24.99 at Costco, or $5 per liter. The best we can do elsewhere is $6 per liter at Trader Joe's.
  • Cereal. We've set ourselves a somewhat arbitrary limit of 10 cents per ounce, or $1.60 per pound, for cold cereal. Normally, this limits us to only one type: Aldi's raisin bran at $1.51 per pound. Costco couldn't actually beat this price, but it still met our criteria, at $1.53 per pound for a big box of Kellogg's Raisin Brain. 
  • Oats. Rolled oats, which are also part of Brian's complete breakfast, cost us $2.29 for a 42-ounce can (5.45 cents per ounce) at Aldi. Amazingly enough, Costco was able to narrowly beat this price, offering a 10-pound box of Quaker Oats for $7.99 (5 cents per ounce). We wouldn't make a special trip just for that, but since we were low on oats anyway, we snagged a box and were quite chuffed with ourselves over the bargain.
  • Walnuts. Typically, the best price we can find for these is around $6 a pound at Trader Joe's. Occasionally, we'll find them on sale for closer to $5 a pound—but the 3-pound bag at Costco for $11.99, or $4 a pound, was a steal. (We also found pine nuts for around $18 a pound, which is cheaper than any other store, but decided it was still more than we were prepared to pay.)
  • Milk. We usually get the best prices on nonfat milk at the Shop Rite: between $2.50 and $3 a gallon, depending on the week. But at Costco, it was only $2.21 per gallon—a price we haven't seen in years. This isn't a huge enough savings to make it worth a trip to Costco every time we need milk, but we'll certainly make a point of picking some up whenever we're there.
So all in all, there are enough good deals at Costco to make it worth visiting regularly and squeezing all the value we can out of our membership. We'll see at the end of the year how much we've really used it—but in any case, it will probably be worth keeping it at least one year more, since I'm probably not more than a year out from progressive-lens territory myself.
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