Costco Merchant Services Review
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- Date Established
- Issaquah, Washington
- No early termination fee
- Robust POS system available
- Multiple hardware options
- Expensive tiered pricing processing rates
- Poor customer support
- Hidden fees
Costco Merchant Services Overview
While you’ll find out through this review that Costco Merchant Services as a whole is disappointing to me, I can at least give it to you straight. That’s because being busy may be an understatement for you, and things such as binding contracts, expensive rental agreements, 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.
What we found out about Costco Merchant Services is that it 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). Elavon has a shaky reputation at best, and we’ll be digging into this company as well.
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 out of 5 stars. Elavon also received a similar rating in our full Elavon review. So what do you 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.
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 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:
- 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, a traditional terminal solution for you may be the Ingenico Desk 3500 offered by Costco. Costco offers additional hardware options upon request but does not disclose what those are via its web site.
- 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, EMV, and NFC-based payments. This hand-held terminal also includes many features, such as 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. The Poynt 5 Smart Terminal is a newer option that includes most of the features in the original Poynt Smart Terminal, with a smaller screen size of 5 inches, as seen below. Another new option is the Ingenico Move 5000, which is a Bluetooth hybrid card reader that allows you to take NFC and contactless payments along with traditional cards.
- Point Of Sale Tablet: The Ingenico Moby is a hand-held POS tablet so that your staff can settle the bill table side or provide more flexibility of movement at your shop. You can accept EMV and contactless payments, and it includes end-to-end encryption for payment security.
- Point Of Sale Systems: The talech counter-top hardware includes a fairly exhaustive list of features for the standard and premium options (pricing not disclosed) but the most notable include:
- Multistore 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 (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. Talech Online Ordering now allows you to create a mobile-friendly website to take orders online as well.
- 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 that 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 it uses a hosted payment page for additional security. The Converge payment platform also offers billing and invoicing so that you can collect and track payments. This service allows you to accept 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 groundbreaking 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 offers a few different pricing plans that it has laid out on its site, but each comes with some particular caveats.
Tiered Pricing Plan
Costco Merchant Services prominently advertises the following processing tiered pricing rates on its 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, 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).
Clear & Simple Pricing Plan
Costco also offers a Clear And Simple pricing plan to customers with an average ticket size of $10 or above at its terminal. Pricing is much more predictable, but you can expect a much higher rate:
- Swiped/Dipped: 2.49% plus $0.07
- Keyed-In Transactions: 3.49% plus $0.17
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, including Colorado, Connecticut, Kansas, Maine, Massachusetts, Oklahoma, and Puerto Rico. In a nutshell, these particular states have regulations against customer surcharges, so you can’t legally use the plan. 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% surcharge on credit card transactions, which covers your acceptance costs.
Note that this pricing is only available when you process through the Ingenico terminal.
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
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.
Hardware & Software Costs With Costco Merchant Services
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 in the Contract Length & Early Termination Fee section, 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 three 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. We dig a little deeper into more concerning details of the rental agreement under the Contracts Length & Early Termination Fees section coming up.
Monthly Software Charges
Software charges for Converge for online and mobile processing are currently being waived for new customers, but the deal only lasts for a few more months, and fees will start back up once that promotional period ends for the customer. Therefore, we need to understand the additional fees for the Converge and Talech (for POS) software.
- Talech Starter: $25.00/month
- Talech Standard: $34.99/month
- Online Ordering with Talech Standard: An additional $49.00/month
- Talech Premium: $84.99/month (includes online ordering)
- Converge Software: $5.00/month
- Converge Software Setup Fee: $140.00
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 $10 monthly charge for Safe-T solutions is required for the life of the device with any Poynt purchase and includes card data encryption, tokenization, and enrollment in our PCI compliance program.
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.
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. Early termination fees can be expensive ($300 to $500 in some cases) and, as you can imagine, 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.
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!
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 it offers some 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.
For these reasons, we have to consider Costco Merchant Services as somewhat deceptive in its 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. 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. 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 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, 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.
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 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 for Costco, we need to do a bit of research on this company. Unfortunately, it doesn’t look great.
- Trustpilot: 1.3/5 Stars for Elavon
- Better Business Bureau: 1/5 Stars for Elavon’s Customer Reviews
- BBB Rating: Elavon has an A+with the BBB itself
Negative Reviews & Complaints
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, 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. Here’s what the current BBB status is for Elavon Merchant Services:
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:
- Poor Customer Support: Elavon provides customer service, 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, 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
Unsurprisingly, the only positive feedback we could locate on Costco Merchant Services came from its website, and they are technically titled Elavon Customer Reviews. 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.
Given everything we’ve covered in this Costco Merchant Services review, you may have concluded that it’s just not the best option out there. The fact is that Costco as a payment processor 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. 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 or qualify for the Zero-cost plan, we can’t recommend a merchant account from Costco Merchant Services.
Overall, we’re awarding Costco Merchant Services 3 out of 5 stars. This rating is indicative of the fact that there aren’t many significant differences between the back-end processor, Elavon, and Costco 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. There isn’t any outstanding or unique feature offered by Costco that would cause us to give the company a stronger endorsement.
Check out our Merchant Account Comparison Chart to see your other options in processors, and for more on how to save money with your merchant account, check out These 8 Cheapest Credit Card Processing Companies Will Save Your Small Business Money.
We've done in-depth research on each and confidently recommend them.
We've done in-depth research on each and confidently recommend them.