Warehouse clubs, including Costco (NASDAQ: COST) and Walmart's (NYSE: WMT) Sam's Club, offer an appealing proposition: Customers can pay an annual membership fee in exchange for access to no-frills warehouse stores where the prices are low -- sometimes unbeatable.
While these memberships seem like great deals, they also come with their own set of risks. Warehouse clubs tend to sell items in bulk, and they stock their shelves with items that tempt you to spend extra.
That's all well and good if you'll actually use a two-gallon jar of mayonnaise, and if you were already planning to buy a drone. If that's not the case, then Costco and Sam's Club could actually cost you more than you save.
Still, both companies offer good prices -- sometimes on things you may never have guessed they would sell. If you enter the store with a plan, it's possible to save money and have some fun doing it. Here are 15 tips that will help you accomplish both.
1. There are different membership tiers
Costco has two classes of membership. The Gold Star tier costs $60 per year and gets you into its warehouses. Executive costs $120 a year but gives members 2% back on eligible purchases, with the rewards capped at $1,000 per year. The company also has a business membership that costs $60, with the key difference being that the account owner can add additional cardholders to the account for $60 per person.
Sam's Club offers a basic Select Club membership for $45 a year. For $100 annually, consumers can join Select Plus, which offers $10 back on every $500 in qualifying purchases; rewards are capped at $500 a year. Plus members also get free shipping with no minimums and early access to stores during the week at some clubs.
2. Not everything is cheaper
Just because you're shopping in a warehouse club does not mean you will be paying the lowest possible price. That's especially true of electronics and other big-ticket items. Even groceries and other household items aren't always priced competitively.
If you end up paying more for paper towels, well, that's not such a big deal. Paying extra for a TV or computer, however, can set you back hundreds, so do some comparison shopping.
3. Consider the total price
It's only a deal if you save money per serving when you factor in waste. That means that buying a tray of 36 doughnuts may not be cheaper if you throw a dozen away. It's also not really cheaper if you increase your consumption in order to take advantage of the deal price.
The same is true for anything you buy in a warehouse club. For example, the price per pill on Advil or Tylenol may be great, but if you end up throwing some away due to expiration, you've paid more per pill than you thought you did. Watch out for items that expire quickly or have longer shelf lives, but are used in small quantities.
4. Club credit cards compound the savings
Both Sam's and Costco offer credit cards that save members even more money. These are generally on top of any cash back a member may get through a premier membership.
The Sam's Club credit card offers 5% cash back on gas, 3% on travel, and 1% on all other purchases. Costco's credit card offers 4% back on gas, 3% on eligible travel, 2% on Costco and Costco.com purchases, and 1% back on everything else.
5. You can graze
On the weekends (and sometimes during the week), both major warehouse clubs have workers in their stores offering free samples. These can include snacks, beverages, meats and cheeses, and prepared foods.
Not only can you eat some free food, but you may also discover a great new product or get some cooking ideas. On top of that, samples allow your kids to try things before you risk spending money on something they won't like.
6. There's cheap food
While people may joke about skipping lunch due to all the free samples offered at warehouse clubs, that's a hard way to fill up. Both Costco and Sam's Club offer food courts with decent and extremely cheap meals.
Cotsco famously offers a hot dog and a soda for $1.50, as well as cheap pizza, sandwiches, and more. Sam's doesn't match the hot dog deal, but it offers many of the same menu items at very low prices. Both clubs also sell desserts like ice cream and churros that will only set you back a dollar or two.
7. You can get low-priced gas
Not every Costco or Sam's Club has a gas station, but those that do generally have very low prices. In most cases (though not all), the warehouse clubs offer some of the cheapest -- if not the very cheapest -- gas in the area.
8. They have hearing aids
Both Costco and Sam's Club offer hearing aids at prices that are well below those of traditional retailers. In addition, the locations that sell them have trained technicians who can test and fit you to make sure your hearing aid meets your needs.
9. Look for travel discounts
While it's not something you see on the shelves, both major warehouse club chains offer travel services on their websites. This includes package deals involving airfare, hotel, and, on appropriate trips, theme park tickets. In fact, sometimes Costco and Sam's Club have better deals on the major Florida attractions than you can get by booking direct.
This is definitely a case where you need to comparison shop. Travel deals on the warehouse club websites are often, but not always, better than what's offered elsewhere.
10. They sell drugs
You can fill your prescriptions at your warehouse club. In many cases, at least for common drugs, you may also be able to get excellent prices even without insurance.
11. They have deals on gift cards
While the selection is somewhat random, Costco and Sam's Club often sell gift cards for less than their face value. For example, they might sell a $50 restaurant gift card for $40, or they might bundle four movie tickets worth a total of $50 and sell them for $36.
This is one of those warehouse club selections where you never know what might come up. Sometimes you may not even know where to look. Keep your eyes open, and sometimes you'll spot some great deals.
12. The hunt is part of the fun
While items tend to be somewhat seasonal, the selection at warehouse clubs changes all the time. You might find kayaks on sale one day and then giant teddy bears a few days later. Even food items can change frequently, and that big tub of candy may not be there the next time you go in.
13. Don't forget the services
Costco and Sam's Club both offer an array of services on their websites. This includes everything from deals on business accounting software to insurance. Each warehouse club has a different offering, but it's easy to forget to look for these somewhat hidden offers.
14. You don't need to be a member (sort of)
You can shop at Costco without being a member if you have a gift card. You will only be able to spend up to the amount on the card, but you will be able to get in. At Sam's Club, you can get a one-day guest membership on the chain's website for free, though you will pay an extra 10% fee on anything you buy.
In addition, both chains allow members to bring guests. The catch is that the member will need to pay for any purchases.
15. Expect no frills
The name "warehouse club" owes to the fact that Costco and Sam's Club are warehouses that are open to the general public. Merchandise is stacked on metal racks, and "displays" are often little more than piles. Stores also have very little staff on the floor.
Basically, every dime possible goes toward keeping prices low. Don't expect shopping bags or the level of service you get at other stores, though you can get the help you need if you look for it.
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Daniel B. Kline has no position in any of the stocks mentioned. His father-in-law works in the hearing aid department at Costco. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.