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

A: 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%.
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• 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.