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Amazon Prime cost jumps nearly 20 percent for monthly subscription

Those of you paying for Prime month to month will see a higher fee of $12.99. Annual fees will remain the same.

Amazon.com logo painted on a concrete wall.

Amazon just raised the cost of its Prime service for those who subscribe month to month.

Ben Fox Rubin/CNET

If you pay for Amazon Prime membership on a monthly basis, get ready to pay a little more.

The online retailer on Friday said it raised the monthly fee for Prime to $12.99 from $10.99, up 18 percent and effective immediately. The monthly student rate increased to $6.49 from $5.49. Customers using the monthly option will start paying the higher price on their first payment after Feb. 18.

The good news is that if you pay for Prime annually, whether the $99 full price or $49 student rate, your costs won't increase. The monthly option for customers using government aid didn't change, either.

Customers of the Prime service, now estimated to reach 90 million US households,  routinely spend about twice as much on Amazon as non-Prime shoppers. With Prime serving as Amazon's engine for retail sales and customer loyalty, any price hikes come with risk of a blowback from consumers. But, with Amazon's shipping costs constantly increasing, the e-commerce giant also needs to balance customer satisfaction against its own bottom line.

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An Amazon spokeswoman said the increase resulted from Prime members' "tremendous appetite" for Prime benefits including unlimited two-day shipping, as well as Amazon's continued investment in Prime perks.

Friday's price increase is the first one Amazon has instituted since it created the monthly payment option in April 2016. Monthly payments were already more expensive for customers than the annual price, amounting to $131.88 a year. The total yearly cost will now be $155.88.

Since introducing Prime in 2005, Amazon has raised the annual membership fee just once, to $99 from $79 in 2014. The annual membership continues to be the more popular payment option, partly because it's been around much longer than the monthly option.

Netflix, which offers a rival streaming video service, in October raised subscription prices for most US viewers, marking its first US rate increase in two years.

"This isn't really a surprise," Forrester analyst Brendan Witcher said of the Amazon price increase, noting that retailers routinely introduce new services and then tweak the pricing.

He added that the change could result in more people switching to an annual membership and perhaps slower growth for Prime in 2018. Amazon's spokeswoman said the company is "indifferent" to whether people pay annually or monthly.

Amazon in recent years has seen strong growth in Prime sign-ups, though the company still doesn't disclose specific figures on Prime memberships. Amazon said in January that "more new paid members joined Prime worldwide this year than any previous year."

Witcher said he doesn't see Amazon raising the $99 annual fee, which would push the price above the psychologically significant $100 mark.

"The $99 fee seems to work for Amazon right now," he said, "and I expect them to hold that line as long as it brings customers into the service."

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