Costco Merchant Services Review
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- Date Established
- Issaquah, Washington
- No early termination fee
- Robust POS system available
- Multiple hardware options
- No American Express Acceptance
- Expensive tiered-pricing processing rates
- Poor customer support
If you’re a business owner, being busy may be an understatement, and that’s why things like binding contracts, expensive lease agreement, and unclear pricing can take even the best of us by surprise. These unfair and yet all-too-common practices among some of the biggest names in payment processing are part of why we do what we do here. Sure you (probably) aren’t going to find a perfect processing company, but we hope to find a company that makes life easier, not harder for small business.
It sort of makes sense then, that Costco would have gotten into the payments scene. Businesses of all kinds already rely on (and trust) Costco for essential supplies and services, so why wouldn’t you trust the wholesaler to also help you get the best prices on payment processing? Costco Merchant Services is a merchant account provider headquartered in Issaquah, Washington. The company is a division of massive big-box retailer Costco, which has been in business since 1983. Costco’s Merchant Services division has been operating since 1997. However, it’s not a direct processor.
What we found out about Costco Merchant Services is that it functions as a reseller for Elavon (read our review), 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).
Unlike many other resellers with this same type of setup, the company openly advertises its relationship with Elavon and features the processing company prominently on the home page of their website. Elavon also has a page dedicated to Costco’s payment processing benefits. We approve of this transparency, as merchants are commonly confused by the relationship between merchant account providers and their back-end processors. They’ve left no room for surprises. When you get around to needing customer support, you know who you’ll really be talking to, and it won’t be Costco.
As you’ll see in this review, Costco Merchant Services is a bit of a mixed bag when it comes to its products and services, fees and rates, transparency, and customer support. While it’s definitely not anywhere near the worst we’ve seen, it’s not the best either.
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, nothing could be further from the truth. Costco Merchant Services offers few discounts over what you’d likely pay if you signed up directly with Elavon, and most of them are limited to Costco members. But what’s more disturbing is that the company’s advertised tiered pricing plans could be even more expensive than working with Elavon directly, especially for a larger business.
Considering all the pros and cons, Costco Merchant Services earns an overall rating of 3.5 out of 5 stars. Overall, Elavon also received the same rating in our full Elavon review. So what do you really need to know about Costco Merchant Services? Read on to find out more about each category, or check out our Merchant Account Comparison Chart for an overview of our top-rated providers.
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Table of Contents
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 that is conveniently glossed over is that you’ll only be able to accept Visa, Mastercard and Discover through your Costco merchant account. If you want American Express acceptance, 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 their 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:
- Credit Card Terminals: If you’re looking for a simple and likely more affordable card reader that supports PIN debit, credit, EBT, and electronic gift cards, the VeriFone VX 520 is probably the tool for you. It’s also EMV chip-card enabled and also has integrated contactless technology, so you’re ready to take digital wallet payments as well. Pricing wasn’t disclosed for this hardware, but around the web, we spotted a general ballpark of $120 — give or take. Your costs may vary, but be aware of what the going price is for this one.
- Smart Terminals: Costco Merchant Services features the Poynt Mobile Terminal, a unique hardware offering that combines a tablet display with all the payment processing features of a credit card terminal. Poynt is a smart device that is fully mobile, wireless and accepts magstripe and EMV via one entry point, as well as NFC-based payments. This hand-held terminal also includes many features like a built-in QR scanner, mobile reporting, and an “HQ” dashboard you can access at your desktop for deeper insights in sales and customer data.
- Point Of Sale Systems: For a more robust POS system built for the larger inventory of a retail shop, talech with Elo provides a wide range of tools to choose from. Optional hardware includes an iPad stand, barcode scanner, cash drawer, payment terminal, and iPad. Additionally, this system integrates with any mobile devices you purchase through Elavon/Costco as well. However, you are limited to using an iPad, as this system isn’t compatible with Android devices. Because your POS system can sync across multiple devices, you can also add the compatible mobile processors (see next section) and offer greater mobility to your wait staff, allowing them to settle the tab right at the table with a mobile reader.
The talech device includes a fairly exhaustive list of features for the standard and premium options (pricing not disclosed) but the most notable include:
- Multi-store syncing and management
- Inventory management (e.g., create item variations and bundles)
- Employee management
- Reporting and analytics by product and employee
- Customer management
- Inventory alerts (premium feature)
- Purchase orders (premium feature)
- Stock take (premium feature)
- Inventory tracking and reporting (premium feature)
- Restaurant POS: talech also offers POS options for restaurants including seat and table management, order modifications, and splitting checks multiple ways for your visitors.
- Mobile Processing: Costco offers Elavon’s Converge Mobile app for mobile payment processing. It’s available for both iOS and Android. In addition to a smartphone, the app requires a ROAM device (a fancy way of saying “mobile card reader”). Your choices are the Ingenico RP457c card reader and the Ingenico iCMP. Both devices can connect to a compact Bluetooth printer so you can print customer receipts.
- Online Payments: For eCommerce merchants, Costco Merchant Services offers Elavon’s Converge omnichannel payment platform. Converge combines the functions of a payment gateway and a virtual terminal, and uses a hosted payment page for additional security. The Converge payment platform also offers billing and invoicing so you can collect and track payments. This service allows you to collect payment from a secure online form and also have real-time payment tracking. Additionally, you’ll have some reporting and analytics features. Reporting could be as simple as sales tracking or could include specific product information or inventory tracking.
- Security Features: Costco claims to use “powerful security” to protect every transaction and that the latest technology protects customer data. And we believe that to be the case. You can rest assured that all of the hardware and software you utilize through Costco via Elavon is compliant with the latest security standards according to the PCI DSS (The Payment Card Industry Data Security Standard). Costco uses encryption to protect your customers’ payment data, and though it doesn’t disclose the specific encryption method, it appears to be Point-to-Point (P2P) encryption. Tokenization is also used to secure payment information through data transfer and ensures PCI compliance.
None of this is ground-breaking or cutting edge; again, it’s just Elavon’s products repackaged for Costco members. And it’s not ideal if you have very specialized needs, but most retail merchants (and even service businesses) should find what they need with Costco.
Fees & Rates
Costco Merchant Services prominently advertises the following processing rates on their home page:
- On-Site & In Store: 1.22% + $0.12 per transaction
- On-the-go: 1.22% + $0.12 per transaction
- Online: 1.99% + $0.25 per transaction
In the fine print, they note 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 like this, as they 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 Worst.
Costco doesn’t mention interchange-plus pricing at all on their website. Elavon offers interchange-plus pricing to some of its merchants, so it’s possible that it’s available through Costco also. Companies that offer both tiered and interchange-plus pricing plans are more likely to try to set you up for one of their tiered plans, as they’re more profitable for the merchant account provider.
Costco Merchant Services discloses several fees on their website, but only for some of their solutions. You won’t find specifics on hardware or software prices for the POS, for example. Despite this, Costco is still more transparent than many competing providers who don’t disclose any of their fees at all. Here’s what you can expect to pay:
- A monthly minimum if charges are less than $20
- $4.95 monthly statement fee for non-Executive members
- $10 chargeback fee
- No annual fee
- No batch fees
- No IRS reporting fees
- No PCI compliance fees
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. The application fee is a one-time charge, so after the first year, you’ll only save $59.40. In other words, it’s not worth it to purchase an Executive membership solely to save money on your merchant account.
Hardware & Software Costs With Costco Merchant Services
To learn more about any monthly software pricing and hardware costs, you’ll need to get on the phone with a salesperson for a free demo and talk. While this scenario is anything but unique, it also makes it difficult to compare or note any red flags with pricing.
Elavon offers its merchants the option to lease hardware, which means that Costco merchants will likely also be offered the possibility to lease. We do want to caution anyone against taking on a lease agreement. They can put merchants in a binding, costly situation because the terms are often noncancelable, even if you terminate your merchant agreement. We discuss contracts and lease agreements later in this post, but keep in mind that you’d be better off getting a small loan rather than going with a lease option.
Costco also mentions that it has a financing program:
We also offer installment payment plans for added convenience. Our Hardware Installment Plan gives you the flexibility to pay for your qualifying hardware purchases from Elavon over the course of three consecutive, interest free monthly payments.
This is pretty vague — you’ll only be able to get financing on specific (and undisclosed) hardware purchases, and the financing term is only 3 months. It’s a bit better than buying outright, but if you need a lot of equipment, that’s going to mean a large upfront investment.
Hardware costs will depend on which machines you choose, and software depends on whether you plan to sell 0n the go, in store, or online. But we were able to find a bit of information:
- $149 setup fee for Converge (includes mPOS, online platform)
- $5/monthly fee for Converge
- $76 for ROAM device/mobile card reader
We also found something else about pricing that isn’t all that obvious at first glance. On Costco’s products and services overview page, you’ll find some fine print in regards to any Poynt item:
A monthly charge for Safe-T solutions is required for the life of the device with any Poynt 5 purchase and includes card data Encryption, Tokenization and enrollment in our PCI compliance program. This is in addition to payment processing fees. Services provided by Elavon. This product is available to Costco U.S. members only.
What this means is that unlike all of the marketing claims, merchants will be paying extra for payment security if they purchase any of the wireless lines of products. I can’t help but ding the inconsistency of claims throughout marketing materials that claim merchants won’t pay extra fees, and then give merchants an additional monthly charge while not disclosing the price on top of it.
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 which 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. Early termination fees can be expensive ($300 to $500 in some cases) and as you can image, have long been unpopular with merchants. Due to customer complaints, we see a growing trend within the processing industry to do away with them, and that’s a great thing! However, it’s important to understand that not having an early termination fee doesn’t necessarily mean it’s easy getting out of your contract. 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 submission of a written form with a period of between 30 and 90 days before the expiration of your contract term.
Cancelling 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.
Sales & Advertising Transparency
Costco’s sales process is better than some providers but not as good as many others. The company’s website offers relatively little information to help you make an informed decision. While there are a few rate and fee disclosures, as well as some educational material, the site primarily focuses on the misleading tiered processing rates that we’ve discussed above.
Costco isn’t as deceptive as some providers, many of whom post the qualified “teaser” rates without any other information or disclosures. The company includes an Understanding Interchange page on their website that provides a very basic explanation of how interchange works and discloses that there are both mid-qualified and non-qualified rates that might apply to your transactions. However, they don’t tie everything together by quoting what those rates are, or mentioning that the majority of your transactions will probably not be qualified.
For these reasons, we have to consider Costco Merchant Services as somewhat deceptive in their rate advertising. 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 like the fact that Costco openly discloses its relationship with Elavon, as many providers don’t do this. Unfortunately, Elavon’s website doesn’t provide much information about rates, fees, or contract terms either. In fact, the Costco site generally offers more detailed information, at least regarding account fees.
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, whereas an in-house sales team generally provides much better service. Note that Costco Merchant Services doesn’t appear to have its own dedicated sales team. Instead, their 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 their merchant services is not easy to find. You’d be much better off following Elavon via Twitter or LinkedIn. I’m a little bit disappointed that neither company has a stronger social presence to keep lines of communication open with merchants, but for a company of this size, it really doesn’t surprise me too much. Sometimes bigger companies offer fewer points of contact. What’s more important is how merchants receive help when they need it. In the next section, we tackle the issue of customer support and what it means for you.
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, 7 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 their 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.
Negative Reviews & Complaints
Assessing negative feedback for Costco Merchant Services is difficult due to the company’s status as a division within a much larger organization. There is no separate BBB 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, we need to do a bit of research on this company. Unfortunately, it doesn’t look great.
Because the company functions as a reseller for Elavon, you’ll find most of the complaints relating to Costco Merchant Services under the Elavon BBB profile. However, keep in mind that Elavon is a huge processor with various resellers, so finding complaints relating specifically to Costco Merchant Services is challenging. However, there are few (if any) differences between the services provided by these two business entities, so merchants signed up under Costco Merchant Services are likely to encounter the same issues as Elavon customers on the whole. Here’s what the current BBB status is for Elavon Merchant Services as of May 2019:
Elavon has an A+ rating from the BBB, but it’s not without its customer complaints. So what are some of the most common issues? Fortunately, our readers have provided some valuable feedback on previous versions of this review that sheds some light on issues to look out for when doing business with Costco Merchant Services. Be sure to read their reviews in the Comments section below. Common complaints include the following:
- High Tiered Rates: While Costco prominently advertises their low rates for qualified transactions, our readers report rates for non-qualified sales as high as 3.35% + $0.29 per transaction.
- Poor Customer Support: Keep in mind that customer service is provided by Elavon, so we wanted to do a little research to see if there were any common themes in the reviews about customer service. Unfortunately, it’s the dominating theme. See our Elavon review for more details about the company’s reputation for inadequate customer 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 they 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 they will shut down your account if they determine 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) 6 months.
Positive Reviews & Testimonials
Unsurprisingly, the only positive feedback we could locate on Costco Merchant Services came from its own website. The Customer Reviews page includes eight written testimonials from a variety of businesses that use Costco/Elavon. While we’re usually suspicious of self-promoted testimonials, these are actually pretty good. They include complete contact information for each reviewer, so it’s possible to follow up with them directly if you want to confirm them. This is what we like to see for company-provided testimonials.
If you’ve been reading this far, you’ve probably already concluded that Costco Merchant Services may not be the best option out there. It’s true that the company has some significant problems, particularly its expensive and misleading tiered pricing rates. Also, their 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. Of course, you’ll need to be a Costco Executive member to reap what savings they offer, although the cost savings this will gain you are negligible. The hardware financing is a nice touch, but plenty of other merchant services providers offer fair pricing and affordable financing for hardware purchases.
However, the company has made some improvements over the past few years, including better options in POS equipment and wireless, 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. Additionally, the elimination of the PCI compliance fee and the early termination fee are both positive steps and reflect growing trends throughout the processing industry. At the same time, the meager cost reductions are going to be offset over time if you’re surprised by the higher costs of tiered pricing rates that Costco uses by default. Unless you’re able to negotiate an interchange-plus pricing plan, we can’t recommend a merchant account from Costco Merchant Services.
Overall, we’re awarding Costco Merchant Services 3.5 out of 5 stars, which is the same as Elavon. Our rating is indicative of the fact that there aren’t many significant differences between the two companies as far as merchant accounts are concerned. While there are certainly much worse providers on the market, we’ve noted some major issues in transparency, pricing, and overall lukewarm or negative reviews. Overall, there isn’t any outstanding or unique feature offered by Costco that would cause us to give them a stronger endorsement.
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