The one perk of getting your gas at Costco

costco gasAP Photo/Chuck Burton

If you are considering signing up for a Costco membership only for the cheap gas, then you might want to reconsider.

Assuming savings of 10 cents per gallon when you buy Costco gas as opposed to fuel sold at your corner gas station, you would need to fill up a car with a 16-gallon tank 37.5 times before your savings covered the $60 annual Costco membership fee.

If you were already planning to join or renew based on the savings Costco offers on its other goods, or if your commute or lifestyle merits that much fuel, then by all means go for it, because membership fee aside, Costco has the cheapest gas in America, and they're selling fuel of the exact same quality as the name brand locations, too.

The low cost of Costco's gas is one of the biggest perks of Costco membership, and it's one the majority of members surely know about and take advantage of.

But how does Costco offer such cheap gas to its members? There are two key reasons. The first is that the company knows it commands intense customer loyalty - Costco shoppers try to stick with the brand, and these reliable gas buyers allow for slimmer margins without profit losses.

Read more: 8 perks you can get as a car owner at Costco

Secondly, while gas is not a true loss leader for Costco - that wold be a product sold so cheaply that it actually loses the company money, but compensates by attracting buyers who make other purchases - Costco knows its cheap gas prices draw people near its warehouses. Those potential customers may well end up spending hundreds of dollars on bulk pasta, blue jeans, or a TV.

And clearly the cheap gas strategy is working for Costco. As of late 2018, Costco had more than 565 gas stations in operation.

Just know that if you want to buy gas from a Costco, you can leave the checkbook or cash at home: Their gas can only be purchased with a debit card or a Visa credit card. Or a Costco cash card, of course.
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