Costco Credit Card Processing

Posted by CreditCardGuru

Q: I’m a small business owner that is considering Costco credit card processing. The fees seem pretty low. Do you recommend them?

credit card processing terminalA: There’s no mistaking that Costco offers a number of opportunities for both consumers and businesses to save money. However, depending on the circumstances, they’re not always the most cost-effective way to go. So is their credit card processing a good deal or not? Well, here’s what you need to know about how they work.

Costco credit processing reviews
Not too long ago actually, a good friend of mine was considering switching to Costco. He and his family have owned a successful convenience store for a couple decades now. But as we continue to transition to a cashless society, the card processing fees are really starting to eat away at their bottom line.

Merchants like my friend’s convenience store store suffer the most, because their transaction sizes are so small. As you probably know, credit card processing rates consist or two parts: (1) a flat fee of around 20 to 30 cents per transaction, in addition to (b) a small percentage of the transaction, which is typically 1.5% to 3%.

For example, let’s say your business had a rate of 30 cents + 2% transaction fee:

On a $5 purchase that would equal 8% of the purchase
On a $50 purchase that would equal 2.6% of the the purchase

Any small business that has a high volume of small transactions is greatly impacted by these costs.

So how much better are Costco’s rates?
Well, for starters, it’s important to understand that the credit card processing Costco program isn’t run by them directly. Rather, they partnered with Elavon (a major payment processing company) to offer their services to Costco members.

At the time of this review, here are the Costco credit card processing rates:

Retail Merchants: 1.48% plus 20 cents per transaction
Internet/Telephone/Mail Order Merchants: 1.99% plus 27 cents per transaction

They were also throwing in a free terminal, but the rebate for it isn’t given until after 12 months of service.

The fine print on Costco credit card processing and others
I definitely consider their rates attractive, but here are some things to consider not only for Costco, but other providers too:

  • As with all merchant card processing services, different rates are charged for different types of cards. For example, reward cards and business cards will cost you more. Being that most credit cards these days have some sort of rewards program, that means that there will be probably be very few transactions which qualify for that lowest rate of 1.48%.
    .
  • The 1.48% for Costco’s service currently applies to Visa and MasterCard. Transactions for American Express and Discover will cost you more. It’s important to remember there are many consumers nowadays who exclusively use AmEx and/or Discover. Since they’re both considered premium credit cards, it’s important to cater to that clientele too and accept them for payment. So be sure and consider the rates for each… the old “Visa/MC only” may have worked in the 90′s but not anymore.

Conclusion?
I do believe Costco credit card processing is a good deal, but I wouldn’t consider it the absolute best for every one. Depending on the type of business you have and average sales volume you get, it may be possible to do a whole lot better going with someone else. So don’t just automatically assume business credit card processing Costco style is the surefire way to go. You will need to work the numbers and compare credit card processing in order to find out who’s right for you.

8 comments... read them below or add your own

  1. Maci November 20, 2013 at 10:48PM

    Anyone have experience with their online system? All our orders are by phone for house rentals.So, few but large charges with never a card on site.

  2. Greg April 4, 2013 at 4:45PM

    I strongly recommend not using the Costco/Elavon as a CC processor. I’ve never been signed up through Costco, but have had Elavon through U.S. Bank. U.S. Bank owns Elavon. I had a horrible experience with Elavon. As a small repair shop I need the credit card deposits to hit my account as soon as possible to prevent overdrafts due to large parts purchases and daily cost of business. 75% of all my repair work was paid with a credit card. On my processing contract I made if very clear that the money had to be in my account with in 24 hrs if I batched before 3 pm. This was the main reason that I went with this processor. Every thing was fine for about 4 months then I started getting over drafts from my bank. I couldn’t monitor my account on a daily basis, but soon found that the money wasn’t getting into my account for several days. Up to 5 days sometimes. I called U.S. Bank. They referred me to Elavon saying it was their problem. Elavon told me that my original contract was void since a new company had bought them out. I later found that Elavon was owned by U.S. bank and still owned them. I called the supervisor at Elavon and explained what I found out and asked to be reimbursed for my loss. He hung up on me and wouldn’t take any further calls. I was latter told to go ahead and sue and see what that would get me. In other words I’d be milked dry of time and every cent to get a few thousand dollars back. U.S. bank and 7 other banks posted record profits that year by using this same practice. Pull your funds from the top 8 banks and deposit into a local credit union. Elavon is SCUM!

  3. Brad December 30, 2011 at 1:35AM

    Costco & Sams do have attractive pricing, but that doesn’t mean they can’t be beat both in customer service and pricing.

  4. Mike December 2, 2011 at 11:42AM

    I just want to put out a warning for those that might consider Costco/Evalon to process credit cards for their business. DO NOT trust the salesman who is trying to sign you up with their service and DO make sure that you understand everything in the contract.

    I was using PayPal to process my CC transactions and wanted to move to another CC processor that would have lower fees. I did my research online and it was very difficult to find a reputable CC processing company, who had a clean record without a ton of negative reviews.

    Their online CC processing software cost $179 and the salesman guaranteed me that there were no monthly charges, just the one-time purchase price of the software. He also told me that discount rates were 1.99%.

    Well he basically lied to me to make the sale. After purchasing the software, I got my first statement to find out that I do in fact have to pay $8.00 each month to use the software, even though I already paid $179 for the software.

    Also the 1.99% is only for personal credit cards. Business credit cards have rates as high as 3.75%. My business deals only with other businesses, so I’m basically losing 3.75% on every transaction.

    Well lesson learned. Costco/Evalon are straight out SCUM. Don’t trust a word that they say! Make sure to read through all of the fine print of the contract and if you don’t understand it, then do your research and find out what it means.

  5. Tom Moore February 13, 2011 at 5:48PM

    I wanted to ask someone knowledgeable about a certain specific process regarding cc processing. If someone knows, please enlighten me.

    I have an opportunity to be a third party collector for a business entity. When a third party makes a payment via cc through my website, the company I am hired by gets 100% of the agreed amount (the amount the third party agreed to pay for the product/service). Which means I have to absorb the merchant fee and add in my own service fee. That’s not the problem. For example, lets’s say someone makes a purchase of $100. I would add a flat fee of a certain amount, say $8.00. SO the client pays $108 total. I expect to process about 300 to 400 payments a month. Out of the $108, the company gets $100, the processing cost of say $2.25 to the processing company. The balance stays in my account.

    My question is this. Is the software able to itemize each transaction and detailed above, and automatically transfer the $100 to the company at the end of each business day? The $2.25 can be deducted from the proceeds before they are deposited to my account, so that is taken care of. Along with the $100, I need to provide certain data to the company, such as name, address, item #, other specifics. Can the credit card processing software itemize and provide these details?

    Tom

  6. Sheel January 25, 2011 at 11:03AM

    Costco’s processing actually is not nearly as good as you suggest…

  7. QMS November 11, 2010 at 10:40AM

    This is a really good breakdown of the costco credit card processing. I have also had customers consider sams club google checkout etc. and it all comes down to what best fits a customers needs.
    Again great info here.!!

  8. Dat To April 20, 2010 at 2:18PM

    another thing they don’t tell you is that when their terminals break down they charge you $200 for a replacement and it’ll probably break down every quarter.

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