Spending $55 a year to join Costco (NASDAQ: COST) already represents a bit of a risk as it's easy to make shopping mistakes that make the warehouse club's excellent prices less of an overall value.
Taking the next step and spending $110, a full extra $55, on an Executive Membership seems like an added risk, but it may actually be a safer choice. That sounds counterintuitive, but the more expensive membership comes with a major perk that may actually make it a better deal than the cheaper $55 Gold Star offer.
All Costco membership levels are risky
Before you buy any Costco membership, it's worth remembering that just because the chain offers good prices does not mean that you will save money. It's possible to lose out on joining the warehouse club if you buy items you don't use or get tempted into purchases you don't need.
It's very easy for that to happen because the chain generally sells in bulk. That means it's possible to get a good price on anything from cereal to ketchup, cleaning supplies, or medicine, but actually pay more when you don't use the items purchased before they expire.
In addition, Costco changes some of its selection regularly. That can lead to customers buying an 8-foot stuffed bear, a giant pool toy or some other unneeded, not actually wanted item that seemed like a good idea at the time.
"Taken as a whole and over a span of years, the answer is that warehouse clubs almost never save money for the individual shopper," Billie Blair, an organizational psychologist who serves as CEO of Change Strategists, Inc., told The Motley Fool in an email. That, she added, is due to "membership fees, wastage from overbuying (produce and such), the necessity to buy in quantity (canned goods that sit on shelves and have to be discarded), etc."
If you overbuy or make purchases you never would have made, it does not matter which membership you buy. If, however, you take a disciplined approach to buying and you buy enough, the Executive Membership can be a better choice despite costing more.