Why I Won’t Pay a Fee to Shop at Costco

My husband loves Costco. Many of our relatives love Costco.  Our friends often tell us they are about to go out “on a Costco run.” I think I may be the only person in this neighbourhood who doesn’t “get it.” I think Costco is ok but I won’t pay a fee to shop there.

At the end of this month our Costco membership is expiring. We bought the membership last year so that I could get snow tires I liked, in stock, at a good price, and installed for our new Camry. The savings more than paid for our annual fee (especially since I had a promotional rate for a new membership.) This year, though, we don’t need anything that could generate a similar saving so we’ll be letting our enrollment lapse. Today I’ll make one last tour of the store to see what I’ll be missing.

Why Costco Doesn’t Work for Me

This is all about me. I realize it may be very different for you!

Costco Every Day Low Prices are Not Quite Low Enough

I’ve been a pricing cycle shopper since the university days when I had to budget to the penny. I am basically at the point where I can sense whether it’s facial tissues or bagels that will be coming on sale this week and at which stores. Because we have the luxury of extra money in our budget, I can afford to pre-buy enough staples and dry goods to last from one sale till the next.

So why would I want to buy canned soup, flour, cocoa powder or tissues at Costco? While their prices are good compared to smaller stores regular (read: high) prices, they are no better than those same stores’ sale prices. In fact, Costco’s prices are often higher than the sale prices I pay at the regular grocery stores.

Costco Bulk Packaging Is Too Large

I like some of the buns Costco bakes. Unfortunately, no one else in my immediate family does and none of my extended family lives very close. So I can buy a package but I then either have to freeze several dozen buns, or throw the stale ones out. Neither option appeals to me. (I did give extra buns to neighbourhood friends several times but it feels strangely awkward wandering around offering half-bags of buns or quarts of strawberries.)

Other items are just ridiculously large. Why would I want 4 boxes of baking soda? It takes the rind and juice of one lemon to make my lemon loaf, so why would I want a bag of lemons? I looked at aluminum foil today and tried to think how long it would take me to use 300 feet. (Especially since I ask myself every time I reach for foil whether this use justifies the strip mines for bauxite in South America.)

Costco Photos From Our Location Didn’t Match Walmart for Quality

Admittedly I haven’t tested photo prints in over a year, so I probably should send a few again to check if anything has improved. But just over a year ago I needed quite a few prints of the same few photos. So I sent a batch online to Costco and a batch online to Walmart. I selected Glossy for both stores. The Walmart prints were noticeably crisper and brighter than the Costco ones. The price was the same.

I’m sure the photo equipment probably varies from store to store. This information likely only applies to my closest Walmart and my closest Costco.

Our Costco Has a Terrible Cash Register System

I think it’s just our Costco but anytime I’ve shopped there I’ve always had to line up for at least 10 minutes to get to a cash register. That includes weekdays and weekends, daytime and evening. That’s just sad.

Again, that doesn’t mean it’s like that at other stores. But I’m not basing my decision on whether to renew or not on whether people in, say, Kingston can get through the checkout in two minutes.

I’m a Brand Buyer and Costco Often Does Have What I Use

As someone who has shopped for a family for over a decade, I’ve fallen into buying patterns. There’s a soap I buy because it doesn’t cause skin irritation for two of us. Costco has products by the same company, but not the version I find works best. There’s a kind of boxed soup stock I like to use when I’m in a hurry in my Minestrone recipe. Costco again has the same brand, but it only has the 0% salt version, and I prefer the 30% salt one. (Er, 30% of the amount of salt used in the original version of the boxed broth; it’s not actually 30% v/v salt!) The same story repeats for shampoo, cocoa powder, and honey.

Sometimes Costco even stocks the exact brand and formulation I want. That’s great; until I go back to get more and they’ve sold out and aren’t replacing it.

It’s just a nuisance that I prefer not to deal with. By shopping at other retailers I can get exactly what I want every time I walk into the store.

Reasons Why I Would Shop at Costco If There Was No Annual Fee

There are many things I like about Costco. It’s just the $55 that bothers me.

Costco’s Return Policy is Great

I agree that Costco has a great return policy. As a very careful shopper, though, it’s extremely unlikely that I would buy something anywhere that cannot be easily returned.

Costco Has Some Very High Quality Exclusive Offerings

I agree that some items Costco sells are not available elsewhere and for some of them it’s worth paying a premium. For example, I have relatives who can get great steaks at their Costco every time they shop there.

Costco Has Good Pharmacy Pricing

Luckily, I don’t really know this first hand as, touch wood, we haven’t needed any prescriptions and so on in years. However, I’ve read many places that Costco has very good prices for prescription and even over-the-counter medications. If I’m wrong about that, please leave a comment.

Costco Pays a Living Wage

Again, I only have this information anecdotally so it could be wrong, but I’ve been told that Costco pays its staff a more reasonable wage than many retail stores. That counts as a positive for a store for me.

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Are you a member of the Costco cult? Or is it just another retailer? Please share your views with a comment.

Can I Use My TFSA as Collateral for a Quick Loan?

Sometimes life happens and a person needs a few thousand dollars in a hurry. They may even have that same few thousand saved up in a Tax Free Savings Account but it’s locked up in a GIC that can’t be cashed until it reaches maturity. The question then is: Can I use my TFSA as collateral for a quick loan?

You Can Not Use RRSP Assets as Collateral for a Loan

If you run into financial problems, your bank cannot seize your RRSP assets, at least until you try to withdraw them, to reclaim what you owe them on a loan. Consequently, no legitimate lender will let you use the value of the assets in your RRSP as collateral for a loan.

What Is Collateral?

(This is not a legal definition just an approximate explanation. If you need more details, please talk to a financial expert or lawyer.)

Collateral is something of value that the bank can claim if you default on your loan by not paying it back. For example, if you have a brand new car which is fully paid off, a bank might allow you to list the car as collateral for a small short-term loan. If you don’t pay the loan back in full with the agreed interest by the payable date, the bank can then take your car, sell it, keep the amount needed to redeem the loan and to recover the costs of forcing them to seize your car, etc, then give you the balance of the value.

Banks prefer cash and investment assets as collateral as they are much easier for them to process than physical goods like cars.

You Can Use the Assets in Your TFSA as Collateral for a Loan

Unlike RRSPs, the assets in your TFSA can be pledged as collateral against a loan.

It’s important to remember, though, that the bank does not *have* to allow you to use your TFSA as collateral. It’s up to them. There is no rule that says they must lend you money.

What Type of TFSA Assets Might Be Acceptable As Collateral?

If your TFSA is invested in cash, the bank would probably suggest you just withdraw the cash and use it instead of getting a loan. In most cases, that would be the sensible solution.

If your TFSA is invested in bonds or GICs, the bank would probably allow you to pledge part of the value of those assets as collateral against a loan. They would likely need proof of the terms, principal and interest rates for the assets. You are most likely to be able to get a loan from the same financial institution that holds your TFSA as it would be easiest for them to keep an eye on their collateral and get access to it if you don’t repay your loan.

If your TFSA is invested in individual stocks, mutual funds or ETFs, it gets trickier. The bank would have to decide how risky it thinks those investments are. For example, in mid-November 2008 TD bank shares were worth about $48 each. By mid-December they were down to about $34 each. The institution making the loan knows these types of market drops can occur anytime without warning. Depending on how risky they rate your investments they may or may not accept them as collateral and they are very unlikely to loan you even 90% of the current value of them.

Borrowing Against Your TFSA to Invest in a Non-Registered Account

In his book, How TFSAs Can Make You Rich, Gordon Pape explains that you might be able to use your TFSA as collateral to borrow money which you could then use to invest in a non-registered account.

He also says “you can deduct interest on a loan against a TFSA if the money is used to invest in a non-registered portfolio, say Gena Katz of Ernst & Young Canada and Jamie Golombek of CIBC Private Wealth Management.”

Mr. Pape also points out that many people who borrowed to invest suffered only increased losses, not gains, caused by the crash of 2008-2009. Leverage can increase earnings but it can also cause devastating losses.

For most people and in most situations, I would not recommend borrowing to invest. (Not that you should ever make any investment decision based on my website. Talk to a financial professional for financial advice, not an engineer/tech writer! I’m only trying to share what I’ve learned not tell you what to do.)

In case you don’t already know, you can not deduct interest for a loan used to invest in your TFSA.

Have I Used my TFSA as Collateral?

So far I’ve never needed a short-term loan. I’m hoping I’ll never need to personally test this information.

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Have you ever used your TFSA as loan collateral? Was it to get out of a pinch or to leverage your portfolio? Please share your experiences with a comment.