Top 4 Reasons Why Costco's Membership Fee Hike Won't Drive Members Away

Big news in the retail world: Costco just announced that it's raising its membership fees. This is Costco's first membership in seven years, and it takes effect on Sept. 1, 2024. Starting on that date, Costco Gold Star memberships will cost $65 per year (up from $60), and Executive Memberships will cost $130 per year (up from $120).

If you've been hit hard by high price increases in the past few years, one more price hike for Costco memberships might seem like the last straw. But there are a few good reasons why Costco's new membership price increase is fair and reasonable, and why most Costco members are likely to keep shopping at Costco.

Let's look at why the Costco membership price hike isn't necessarily bad news for Costco members -- and why most members will likely keep paying for these higher fees.

1. Costco has a 90% membership renewal rate

According to Costco's latest annual report, 90% of Costco members renew their memberships. That's a significantly high customer loyalty rate -- the vast majority of Costco members like shopping there and want to remain Costco members. Having to pay an extra $5 or $10 per year for a Costco membership is not likely to cause massive numbers of Costco members to cancel.

2. It's only an extra $5 or $10 per year

The lower level of Costco membership, the Gold Star membership is only going up by $5. That means you get a year of access to Costco for only $65, or about $5.42 per month -- a monthly increase of only $0.42. Most Costco members likely won't notice this extra expense.

If you already buy into the Costco philosophy and love shopping there, you're likely going to keep paying for it. That extra $5 per year (or even $10 per year for the Executive Membership) won't drive many Costco customers to cancel.

3. Costco delivers so much extra value

Paying higher prices never feels good -- but Costco might help you recoup that price hike in other ways. When you look at the total picture of how much money you can save at Costco, it's easy to get extra cost savings that more than make up for that $5–$10 membership fee increase.

For example, that $0.42 per month price hike for the Gold Star membership can easily be recouped by buying a few gallons of gasoline at Costco. Or by eating a $1.50 hot dog combo at the Costco food court. Or by finding a great deal on groceries.

4. Other Costco prices might get cheaper

Just because Costco membership prices are going up doesn't mean all Costco prices are going up -- the items on the shelves might keep getting cheaper. By charging members a bit more money upfront for membership fees, Costco might be able to keep prices lower on everything else it sells.

Membership fees make up about 73% of Costco's profits. Because Costco gets so much cash from memberships, it can afford to keep its profit margins ultra-low on the actual merchandise it sells.

When you pay your membership fee, it's like investing in the Costco shopping experience. It's a statement of belief, like you're saying to Costco, "Here's my membership fee. I'm invested in this partnership. Go find me some great deals!"

Bottom line

When Costco announced it would be raising membership fees for the first time since 2017, it made big headlines in the retail industry. But the impact on Costco members' bank accounts is likely to be generally harmless.

Most Costco members enjoy the Costco experience and save so much money by shopping there that they can afford to pay an extra $5 or $10 per year for the membership card.