Some retailers offer membership reward clubs for a fee that, in return, provide consumers with some sort of convenience or cost savings or both. But not all membership clubs are created equal. To calculate whether a membership club is worthwhile, you need to consider the value of the program's benefits, your shopping frequency and how much you would potentially save.
The editors at ShopSmart magazine recently applied that formula to some popular membership club programs, showing how each could end up being worth their price.
Here's their take:
When it's worth it: ShopSmart figures that if you take advantage of the free video streaming instead of paying $8 a month to subscribe to Netflix, you'd net a savings of $17 a year. To make the membership worthwhile for the free shipping only, you'd want to make you were ordered at least nine times a year from the site (assuming each shipment costs an average of $9).
By the way - if you're a student, you can get Amazon Prime's free shipping benefits for one year through Amazon Student, a free membership program for college students.
But ShopSmart's math shows how it can pay: For $25 a year you get free express shipping plus 40% off hardcover best-sellers, 20% off all adult hardcovers and 10% off almost everything else.
When it's worth it: If you commit to using the membership in stores and online, or even in stores only, you could come out ahead. Here's how: Hardcover best sellers average $15.06. Using ShopSmart's formula, buying six books at 40 percent off would get you a net gain of $11.14 a year.
When it's worth it: While the cash-back option encourages more spending on the website, it can be worth it for individuals and families who seek discounts on big-ticket items like furniture, household items, luggage and jewelry. As long as you spend $100 a year, you pretty much break even.
Farnoosh Torabi is a personal finance journalist and commentator. She is the author of the new book Psych Yourself Rich, Get the Mindset and Discipline You Need to Build Your Financial Life. Follow her at www.farnoosh.tv
More on MoneyWatch
- June Deals: 4 Things to Buy Now
- Cheapest Days to Shop Online
- Consumer Reports: Best Air Conditioners for $300 or Less
- Save Money: 6 Ways to Buy Imperfect Products for Less
- Get Free Gas--At the Supermarket
- Save Money: 10 Weird Ways
- 5 Questions That Will Save You Money
- Outsmarting Sneaky Retail Tricks
- Extreme Couponing: 5 Reasons to Steer Clear