Review of CostCo Merchant Services

Overview

Detailed Review

Below is a detailed review of CostCo Merchant Services offering. The review is broken down into the following categories.

• Features
• Pricing
• Contract Fine Print
• Equipment
• Countries Served
• Contract Length / Termination
• About the Company
• Customer Service
• Common Customer Complaints / Our Verdict
• Who Should / Shouldn't Use this Processor

Features

Depending upon the type of business you own, some of the following features may or may not be important to you.

In this case, we'll presume that the features that CostCo once offered are the same as Elavon's features:

Software Compatibility:
Intuit Quickbooks	Yes
Sage 50	No
Microsoft Dynamics GP	No

Hardware Compatibility:
Windows / Blackberry	No
iPhone / iPad	Yes
Android	Yes
Alternative Transaction Types:
Phone Orders	Yes
Internet Orders	Yes
Snail Mail Orders	Yes
AMEX	Yes
Add Tips to Bills	Yes
eCommerce / Shopping Cart	Yes
International Sales	Yes
Recurring Payments	Yes
EMV Chip Cards	Yes
Contactless Cards	Yes
Loyalty / Gift Cards	Yes
eChecks / Electronic Checks	Yes
Welfare Benefits (EBT/SNAP/TANF)	Yes
Security / Fraud Prevention:
AVS Fraud Protection	Yes
PCI DSS Secure Transactions	Yes
Industry Specific:
HIPAA Compliance (Healthcare)	Yes
Trust Account Debiting (Legal)	No
Fleet Cards (Petroleum)	Yes
Online Menu Orders (Restaurants)	Yes
Countries Served:
U.S.	Yes
Other Countries	Yes
International	Yes

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Pricing

Almost every merchant account services company uses either Interchange Plus or Tiered Pricing (to learn the differences read here). Where companies allow us to disclose pricing information, we show the deals that our secret shoppers were able to achieve. When companies offer both Interchange Plus and Tiered Pricing, we try to get a quote on both options.

CostCo uses tiered pricing, which is quoted as a percentage and a flat transaction fee:

• Terminal: 1.38% plus $0.19 per swiped transaction
• Mobile: 1.38% plus $0.19 per swiped transaction
• Online: 1.99% plus $0.25 per transaction

In the fine print Costco states that these prices are for qualified transactions, but we don't know what the qualified tier consists of. It says that rewards cards process at a higher rate, but we don't know exactly how much higher. They also say that "rates and fees may change without notice." and that definitely is not good.

• If they are like most credit card processors (and they don't disclose enough even in their fine print to find out) this is prime territory for them to jack up your fees through something called "downgraded transactions." You'll find this with a lot of merchants that are trying to use low teaser rates and still charge you high fees. The way it works, is that they show you a low rate for "qualified transactions," but then don't define what a qualified transaction is. In practice, you'll end up with very few "qualified transactions" and a whole lot of mid-qualified or non-qualified transactions which are charged at much higher rates.
• I want to be clear, that tiered pricing isn't always a rip-off, but when you see no definition of what counts as a "qualified transaction" and you don't even see what the mid-qualified and non-qualified rates are, you can rest assured, they aren't likely to be a good deal.
• In sum, this pricing is some of the worst we've seen, as it includes "gotcha" tiers and undefined categories of transactions with undefined rates in those tiers. Steer clear.

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Contract Fine Print

In addition to the fine print costs listed below, Costco adds a $4.95 monthly statement fee for non-executive members (waived for executive members). We based most of the costs below on Elavon's rates, as Elavon is the service provider.

Fine Print Fees:
Termination Fee	None
Setup / Application Fee	$25
PCI Compliance Fee	None
PCI Inaction Fee	None
Gateway Fee	$10
1099-K Fee	None
Statement Fee	$4.95
Online Reporting Fee	None
Monthly Minimum Volume Fee	$20
Accept International Pymt Fee	Yes, variable
Voice Authorization Fee	$.65 minimum per transaction
Monthly Min. Process Fee	$25 maximum
Daily Batch Fee	None
ACH / Direct Deposit Fee	Yes
ACH Charge Fee	Yes
ACH Return Fee	Yes
FANF Fee	Standard
Chargeback Fees	Standard

Our Take: The "possible" charges may or may not exist, depending upon your type of business and equipment used, especially to process check transactions. In the case of pricing and fine print fees, a middle man can always make changes and markups, so be aware that what you see at Elavon may not be what you'll see from Costco.

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Equipment

While your transactions usually take place electronically, the actual device that you use to swipe a customer's card is referred to as "the equipment." This equipment includes hardware and, often, software or apps for that hardware to function properly.

CostCo doesn't offer any equipment for free. They recently started selling equipment instead of leasing, which is good because you can keep your terminal even if you switch companies.

HARDWARE

• Countertop Readers: Two different countertop terminals are offered: Ingenico iCT250 and the Verifone VX 520. They both support all payment types, as well as providing customers a convenient way to pay with chip cards, key fobs, or mobile wallets. The readers are equipped with advanced security for PIN based transactions as well as EMV chip card technology. The small "hand-over design" is good for customer input. There is also an automated download feature, which keeps your payment app up to date.
• Mobile Readers: CostCo offers two different options for on-the-go processing. One is VirtualMerchant, an app for your mobile device as well as a plug in card reader for swiped transactions. It supports all Apple and Android devices and electronically captures cardholder signatures at the time of sale. You can also accept payments by keying in the payment information through the app alone if you don't want to use the card reader.

CostCo also offers a small portable terminal, the Ingenico iWL250G. It supports on the go processing without needing an internet connection or phone line. It also has optional accessories available to purchase: car charger, spare battery, dock, carrying case, etc.

SOFTWARE

Instead of downloading software or an app, CostCo offers its users access to their website called "Converge," formerly VirtualMerchant. It allows users to manage transactions in all payment environments (in-store, mail/telephone order, mobile, and e-commerce). It also accepts all payments types including electronic checks and gift cards.

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Countries Served

CostCo Merchant Services can handle payments from and for merchants in the United States, Canada and abroad.

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Contract Length / Termination

I generally don't like long-term contracts or termination fees in merchant services agreements, because the ability to cancel keeps the credit card processor on its best behavior, including the willingness to make you happy if there's a dispute. Plus, this ability to cancel gives you the ability to move on if you find a better deal.

Elavon offers contracts with no early termination fees, so you can be on a more month-to-month basis. You will just have to take the required steps to cancel your account when you want, or else you'll continue to get billed. There is also an auto-renew after two years, so you should be sure to keep an eye on that complication. CostCo customers should expect no less.

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About the Company

The merchant account services industry is multi-layered. Understanding how those layers fit together can be confusing (Read More in this Article). A good thing to know, however, is whether or not your company is a direct processor (good if yes) or, if not, then to know who they process with and whether or not that processor is reliable. The second thing to know is whether or not the service or sales staffs are in-house or outsourced. In-house staffs are preferable for you, as these staff members may have more access to sources that can resolve your issues.

Processor: Elavon, the company that CostCo sells to merchants as their service, is the 4th largest credit card processor in the U.S. They take care of everything, which is great. Cutting out the middleman where ever you can is always a good idea because it gets rid of unnecessary confusion and can possibly save you money.

Account Sales: Elavon's account sales are all conducted with a corporate sales department. Of course, you should make sure you are talking with a good sales rep because that makes a huge difference. If you choose to go through one of Elavon's many resellers, your sales experience might not be great. Most customer complaints are about customer service through resellers such as CostCo, not Elavon directly.

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Customer Service

Common Customer Complaints / Our Verdicts

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Who Should / Shouldn't Use this Processor

WHO IT'S GOOD FOR:

• High-Volume Merchants: If you're processing at least $100,000 a month, and can watch your bottom line close enough to make sure your rates aren't increasing without notice, etc. Elavon also offers a variety of processing options, international transactions, and every other bell and whistle, so they can cater to more than one need.
• Low Chargeback Merchants: It seems like one of the smaller but recurring complaints was about chargebacks. Customers were not happy with how Elavon handled the situation and wanted more support instead of having to handle it completey on their own. If you have a small amount of chargebacks every once in a while, this problem won't really affect you.
• Internationally Focused Merchants: Elavon's currecy conversion is great for companies who operate around the world. It recognizes most currencies and updates conversion rates frequently.

WHO IT'S NOT GOOD FOR:

• Small Businesses: If you're processing less than $30,000 a month, you would be better off going with a company that is focused more towards small businesses. Elavon is making an effort to gain more trust from small businesses and maybe they'll get there one day, but for now I would go with a smaller processor.
• High Chargeback Business: High chargeback volume is never a good thing no matter which processor you go with. Elavon has the ability to terminate your account and still charge you if they suspect fraud. Overall, you're better off going with a company that specializes in handling this sort of risk.
• Tech People: Elavon's equipment is functional, but not trendy. They don't offer anything that looks cool; even their mobile card readers are bulky and unattractive. So, if you're into the latest advancements in technology, you wont be impressed with Elavon's equipment offerings.
• Non-Detail Oriented Merchants: Given the lack of transparency on pricing, you're going to need to be a tough negotiator (or use a service like MerchantNegotiators.com) to get good clear pricing with these guys. The underlying service is good, but you're going to have to work to get it and keep it, so as not to get ripped off with hidden fees.

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