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Warehouse Clubs: Cost Cutter for Some, Money Trap for Others

Joining a warehouse club can be — but isn’t always — a surefire solution to rising grocery bills.

Sure, the prices can be anywhere from 10% to 40% cheaper than those in the supermarket, which isn’t exactly small change amid increasing food prices. But at $50 and up for an annual membership, you’ll need to shop smartly to reap enough savings for joining to pay off. “For some people, it can be a great deal; for others, it doesn’t make sense,” says Kevin Gallegos, vice president of the Phoenix branch of debt counselors Freedom Debt Relief.

Here are three situations where it can work in your favor, and two where it won’t:

Good if you: Have storage space to spare.

Warehouse clubs do offer some smaller packages and individual items, but the bulk of deals is still all about – well, bulk. 18-packs of paper towels, a dozen one-pound packs of pulled pork, two full-sized containers of ketchup. To save enough to offset the membership costs, you have to be willing to buy big packs, which means having the space to store them properly. Eileen Roth, a Scottsdale, Ariz.-based professional organizer, buys those two-packs of ketchup and mustard, as well as big packs of fresh meat and other goods for her household of two because she has the space to store them. “We really don’t need two bottles of ketchup or mustard, but we will buy it because it saves money and won’t spoil,” she says. “You can’t beat the savings or the cut of meat, so we will bring home the meat and re-package it individually and freeze it.” Another way to beat the bulk: split the membership cost, and the spoils, with a friend or family member.

Bad if you: Only buy specific brands.

Despite all that quantity, most warehouse clubs have a skimpy selection of brands. They might have just one kind of say, tomato sauce, peanut butter or soda. If yours is a Ragu-Skippy-Pepsi household and those aren’t what the club stocks, you’re likely to waste either food (from purchases you don’t eat) or money (fewer savings to offset the membership fee, plus potentially higher prices at the supermarket).

Good if you: Throw a lot of parties.

“Costco is one of my favorite big event resources,” says Teri Gault, founder of sale site TheGroceryGame.com. Prices are great on fancy frozen appetizers like spanakopita, bacon-wrapped scallops and mini quiches. “These really beat the price of a caterer, and are easy to serve,” she says. Gallegos likes the prices on custom sheet cakes at the bakery. Warehouse clubs are often the cheapest place around to buy alcohol, too — some brides and grooms even use them to purchase it in bulk for their receptions. Another good deal: big packs of paper plates and cups. “We can beat Costco with sales and coupons at the supermarket, but for big parties, you rarely have enough coupons to go with the number of smaller packages that you will need,” Gault says.

Bad if you: Are an avid coupon clipper.

Breakfast cereal, canned veggies and toothpaste are among the worst deals at warehouse clubs, simply because there are tons of manufacturers coupons for them — which most warehouse clubs don’t accept, says Gault. (Just one, BJ’s Wholesale Club, accepts coupons.) Combining those coupons and store sales lets shoppers get most items for less than at the warehouse club. Make that substantially less. “The cost per ounce on [cereal] can easily be half as much as the giant boxes of the same brands at Costco, ” Gault says. By the same measure, some of the better warehouse club deals are those that don’t usually have coupons, such as eggs, milk and butter.

Good if you: Are in the market for more than groceries.

Experts often warn against the danger of impulse buys at the warehouse club, and it’s a valid point. The aisles are stocked with everything from office supplies and clothing to high-end jewelry, electronics and tires, and the low prices make it easy to walk out with a flat screen along with your milk. (To avoid that, Gallegos says, bring cash and leave your credit cards at home.) But to turn that warning on its head, if you are in the market for something big-ticket, joining a warehouse club can be an easy way to cut the price on that purchase as well as your grocery bill for the rest of the year. A friend of Frugal Foodie’s joined a club after buying a home to get better prices on appliances, furniture and a few gadgets. The cash she saved on produce and groceries was just icing on the cake.

Frugal Foodie is a journalist based in New York City who spends her days writing about personal finance and obsessing about what she’ll have for dinner. Chat with her on Twitter through @MintFoodie.