Costco Merchant Services Review

Pros

• No early termination fee
• Robust POS system available
• Multiple hardware options

Cons

• Expensive tiered pricing processing rates
• Poor customer support
• Hidden fees

What Is Costco Merchant Services?

Costco is known for their discount membership wholesale outlets, but the company also offers merchant services. Costco Merchant Services functions as a reseller for Elavon, one of the largest processors in the United States. Elavon performs the actual transaction processing and provides all other aspects of maintaining a merchant account (including billing and customer support).

The most significant misconception we found about Costco Merchant Services is that because the retail side of Costco’s business is so well-known for low prices, people assume that merchant accounts through the company must offer amazing cost savings as well. Unfortunately, that doesn’t turn out to be the case here. Costco Merchant Services offers few discounts over what you’d likely pay if you signed up directly with Elavon. These are mostly available to Costco members. Elavon has a shaky reputation at best. Further, the advertised tiered pricing plans could be even more expensive than working with Elavon directly, especially for a larger business.

While Costco Merchant Services may be adequate for some businesses, it doesn’t make the cut for our best credit card processing companies.

Products & Services

Costco Merchant Services offers merchant accounts and a full range of features for retail and online businesses of any size. However, one key detail conveniently glossed over is that you’ll only be able to accept Visa, Mastercard, and Discover through your Costco merchant account. If you want to accept American Express, you’ll have to find an alternative solution. You can sign up with American Express directly, but plenty of other processors bundle Amex acceptance with the other card brands.

Keep in mind that because of its relationship with Elavon, many of Costco’s merchant offerings are proprietary, Elavon-branded products. We were able to find out that Costco offers an interest-free financing option, but it’s limited to a three-month payment period, which isn’t ideal if you need to purchase several devices. It also only applies to “qualifying” hardware purchases and doesn’t specify which ones qualify.

Here’s what you’ll find if you open up an account through Costco Merchant Services:

Fees & Rates

Costco Merchant Services offers four different plans to prospective customers: a tiered plan, a flat-rate plan, a customer surcharge-based plan, and custom pricing for enterprise-level businesses. Beyond that, there are a few additional fees.

Tiered Pricing Plan

Costco Merchant Services prominently advertises the following processing tiered pricing rates on its home page:

• In-Person & On-the-Go: 1.10% + $0.12
• Online: 1.90% + $0.25 per transaction

In the fine print, it notes that these rates are for qualified transactions only. Non-qualified (and mid-qualified) rates will be higher. In fact, they could be two or even three times higher. Costco doesn’t disclose those rates, of course, but you should be aware that only a small percentage of transactions will likely fall into the qualified category, especially if your customers tend to use business or rewards cards (the most common type of cards to be downgraded to mid- or non-qualified). Once again, American Express acceptance isn’t included in your processing agreement.

We don’t like tiered pricing plans since they significantly obscure how much markup you’re paying over the base interchange rate. They’re also almost always more expensive than interchange-plus pricing plans. For a more thorough discussion of how tiered pricing works — and why you should avoid it — see our article, Why Tiered Pricing for Credit Card Processing Is The Most Expensive Option (And How To Avoid Overpaying).

Built Around You Pricing Plan

Costco also offers a flat-rate pricing plan to customers. Pricing is much more predictable. The flat rate is higher than the qualified transaction rate you see advertised with the tiered plan, but you may also save money on transactions that would otherwise cost more than the flat rate.

• Swiped/Dipped: 2.3% + $0.10
• eCommerce: 2.6% + $0.10
• Keyed-In Transactions: 3.2% plus $0.10

Zero-Cost Credit Card Transaction Pricing

Costco now offers a plan with no additional transaction fees, but this plan is not available in all states/areas, including Colorado, Connecticut, Kansas, Maine, Massachusetts, Oklahoma, and Puerto Rico. That list may change in the future as more states allow credit card surcharges. Here’s the deal on cost for your business with this plan:

• Debit Card Transactions: 1% plus $0.25
• Dip/Swipe: Your customer cardholders pay a 3% – 4% surcharge on credit card transactions, which covers your acceptance costs.

Note that this pricing is only available when you process through the Ingenico terminal and on Converge software.

Additional Account Fees To Expect

Costco Merchant Services discloses several fees on its website, but only for some of its solutions. You won’t find specifics on hardware or software prices for the POS, for example. Here’s what you can expect:

• A monthly minimum if charges may apply
• $4.95 monthly statement fee for non-Executive members
• $10.00 chargeback fee
• No annual fee
• No batch fees
• No IRS reporting fees
• No PCI compliance fees
• Assessment fee
• Voice authorization
• Software charges (Talech and Converge)

Other potential fees, such as PCI non-compliance fees, are not disclosed. You’ll want to check your contract very carefully before signing up to avoid being surprised by a “hidden” fee later. Overall, however, Costco’s disclosed fees are generally less than the industry average. If your business is seasonal, you’ll want to inquire about waiving the monthly minimum and monthly account fee (if applicable) during the months when you aren’t using your account.

The company is also somewhat unique among merchant services providers in that it waives several account fees for merchants who are also Costco Executive members. If you have a membership, you won’t have to pay the $25 account application fee or the $4.95 monthly statement fee that everyone else has to pay. Unfortunately, this only adds up to $84.40 in savings during the first year of your contract, and a Costco Executive membership currently costs $120 per year.

Sales & Advertising Transparency

Costco Merchant Services crams a decent amount of information onto what is more or less a single page on its website. You will, however, want to be sure to read the fine print at the bottom of the page, as that’s where a lot of the meat is. We like the fact that Costco openly discloses its relationship with Elavon, as many providers don’t do this.

If you’re still interested in opening a merchant account with Costco Merchant Services after reading this review, we recommend that you contact a sales representative and obtain a full rate quote for your business. You should also ask to look over the merchant agreement before you sign it as well as the fee schedule, as many of the “hidden fees” you might not be aware of will be disclosed there in the fine print.

We haven’t found any complaints about the use of independent sales agents by Costco Merchant Services, and that’s a good thing. Independent agents are notorious for employing high-pressure sales tactics and failing to disclose important contract terms to sell accounts. In contrast, an in-house sales team generally provides much better service. Note that Costco Merchant Services doesn’t appear to have a dedicated sales team. Instead, its website directs you to contact the Elavon sales division, which is available from 9 AM to 8 PM EST, Monday through Friday.

Because Costco Merchant Services functions as a division within the much larger Costco brand, it doesn’t have an independent social media presence of its own. Costco itself has a Facebook page, but information about its merchant services is not easy to find. You’d be much better off following Elavon via Twitter or LinkedIn.

Contract Length & Early Termination Fee

Costco Merchant Services contracts have a standard length of three years from the time you sign your contract. They also include an automatic renewal clause that will renew your contract for a period of one (or two) years at a time. The company does not charge an early termination fee (ETF) if you close your account before the expiration of your contract. These terms are identical to those for merchants who sign up directly with Elavon.

No early termination fee is a bright spot for Costco Merchant Services, but you are still obligated to keep your account open for the full three years, and you’ll have to take steps on your own if you want to avoid having it automatically renew. Closing your account will require you to follow all of the directions provided in your contract to the letter. While we weren’t able to obtain a copy of Costco/Elavon’s current merchant agreement, most providers require the submission of a written form with a period of between 30 and 90 days before the expiration of your contract term.

Another concerning discovery is that if you take the company up on its rental agreement for certain terminals, you’ll face a $200 restocking fee if you don’t finish out the 24-month agreement! You’ll probably pay far more than the terminal is worth in the first place on a rental plan — so buyer beware!

Canceling isn’t made easy, and it isn’t something you can do over the phone. If you fail to provide the minimum required notice or submit the appropriate documentation, it’s quite likely that your contract will automatically renew, and you’ll continue to be billed for monthly account fees until you properly close your account.

Customer Service & Technical Support

Costco Merchant Services doesn’t provide its own customer support. Instead, you’ll need to contact the customer service division at Elavon. The good news is that customer service is available by telephone or email, 24 hours a day, seven days a week.

While it’s nice not to have to worry about getting the run-around between the two companies as to who is responsible for a given issue, having a single point of contact doesn’t mean you’ll get the best possible support. Unfortunately, Elavon has a somewhat poor reputation for customer service and support (see our User Review section), so you might want to try to solve the problem on your own before contacting them.

While Costco Merchant Services doesn’t provide resources on its website for self-help, you do have access to materials through Elavon’s site. The Elavon Welcome Center includes an in-depth resource with tutorials and equipment documentation.

Costco Merchant Reviews, Complaints, & Testimonials

• Trustpilot: 1.2/5 Stars for Elavon
• Better Business Bureau: 1.18/5 Stars for Elavon’s Customer Reviews
• BBB Rating: Elavon has an A+with the BBB itself

Negative Reviews & Complaints

Assessing the user reviews for Costco Merchant Services is difficult due to the company’s status as a division within a much larger organization. There is no separate Better Business Bureau profile for Costco Merchant Services, and the main Costco profile contains hundreds of complaints that mostly relate to the company’s wholesale stores. Because Elavon is providing all products and services for Costco, we’d recommend using Elavon’s profile for your research. Unfortunately, it doesn’t look great.

While Evalon has an A+ rating with the BBB, there’s a pretty high volume of complaints–120 in the last three years. Evalon fares poorly on Trustpilot, with a net rating of 1.2 stars. Some issues raised are:

• Hard To Close Account: Some businesses reported receiving bills after they believed they’d closed out their account. Remember that you’re signing up for a long-term contract if you sign up for this service.
• Sudden Account Closures: We’ve seen an excessive number of merchants complain that they were approved for an account, only to have it suddenly closed by Elavon after a month or two of processing. To make matters worse, in some cases, it didn’t provide refunds for terminals that merchants purchased as part of the account setup. Like many other providers, Costco/Elavon does not support high-risk businesses and will shut down your account if it’s determined that you are a high-risk merchant. The best way to avoid this situation is to be completely open and honest about the nature of your business when applying for an account. It’s better to be turned down for an account than to start processing and have your account terminated, with a good chunk of those funds frozen for (at minimum) six months.
• High Tiered Rates: While Costco prominently advertises low rates for qualified transactions, our readers report rates for non-qualified sales as high as 3.35% + $0.29 per transaction.

Positive Reviews & Testimonials

Positive customer reviews of Evalon, and many payment processors for that matter, are elusive. Most of the positive reviews of Evalon, as is often the case, revolve around customer service. We do also have to note that Evalon does seem highly responsive to complaints made to the BBB. Almost every complaint was engaged by an Evalon representative, and many were resolved.

Final Verdict On Costco Credit Card Processing

Costco Merchant Services has some significant problems — namely its misleading tiered pricing rates, some hidden fees, and some potential contractual concerns. Additionally, keep in mind that its terms are very similar to what Elavon can give you if you sign up with them directly, leaving little incentive to sign up with Costco unless you’re already a member. And you will need to be a Costco Executive member to reap what savings it offers, though they are negligible gains in our opinion. The hardware financing is a nice touch, but plenty of other merchant services providers offer fair pricing and affordable financing for hardware purchases. It’s worth mentioning again to beware when it comes to the equipment rental agreement, as you’ll be on the hook for a full 24 months or face a hefty fee.

However, it’s not all bleak. Costco has made some improvements over the past few years, with better options in POS equipment, including its newer smart options and mobile payment terminals. You’ll find robust options for retail, restaurants, and hardware that supports EMV and NFC digital-wallet payments to meet the need of any size business with ease. Still, the pricing models make us hesitant to recommend Costco Merchant Services. Tiered pricing is reliably expensive. There are better places to get flat-rate pricing. The surcharge plan is interesting but may be more trouble than it’s worth. Unless you’re able to negotiate an interchange-plus pricing plan or qualify for the Zero-cost plan, we can’t recommend a merchant account from Costco Merchant Services.

To see your other options in processors, and for more on how to save money with your merchant account, check out our picks for cheapest credit card processing companies.

Credit Card Processor Review Methodology

We evaluate and test each payment processor that we review at Merchant Maverick, placing special emphasis on certain key characteristics in order to generate our granular ratings for merchant accounts and credit card processors.

For payment processing reviews, we use a 24-point rubric to evaluate the provider. First, we look at pricing structure – interchange plus, subscription-based, tiered, or hybrid – giving the most points to providers that provide fair, transparent pricing and docking those that rely on tiered models. Then we examine rates, the presence and transparency of early termination fees, and any additional fees.

We also look at contract length and fairness and test out sales staff and customer service channels ourselves to ensure that the company uses reputable, above-the-board sales techniques. Finally, we take the company’s online reputation into account, reading customer reviews and comments.

Read more about how we rate payment processors.

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Credit Card Processing With Superior Support

Helcim	Visit Site Read our Review

With Helcim, you get everything you need to accept credit card payments online or in-person with a free account, plus high-quality support from real humans. Start For Free.

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