If you are thinking about using Costco for merchant services you might want to read this article first.
Because not too long ago a good friend shared his story with me about signing up with Costco for merchant services rather than talking with a few other merchant account providers.
And as it turned out that mistake cost him.
You see, soon after he signed on the dotted line his merchant account fees started going up each month.
What’s worse, the contract did not guarantee his rates.
Without knowing it (or being told) he basically agreed to an “introductory rate” offer.
And when he finally checked the fine print he discovered that they could raise his rates each month without any prior notice or warning.
So much for that “great deal” he got, right?
Now the question you might be asking yourself is how this happened in the first place…
The truth about processing rates
For starters, Costco is NOT in the merchant processing business. Or the credit card processing business.
And now they finally admit this fact.
They do not set up your account, or handle your account. And if (when) there’s a problem they will not be able to fix it. In fact, they have nothing to do with you after you are referred off to another company.
But here’s what else you don’t know…
Their claim that they “teamed up with Elavon (formerly NOVA)… to provide Costco members with exclusive processing rates” is MISLEADING at best.
How can I say that?
Because ALL processing companies have to work with the same “INTERCHANGE fees.” And interchange rates (set by Visa and MasterCard) dictate the overall fee structure that business owners have to pay to accept credit cards.
This is an undeniable fact.
What’s more, because they receive a referral fee (a cut of the “action”) do you really think you are paying less?
Think about it.
The real reason why they “teamed up” with Elavon (formerly NOVA) no doubt involves what their “cut” or revenue split will be on each account that signs up through them.
Costco could choose from any number of “mega processing” companies. But I guess Elavon cut them the best deal.
And who pays for this. You do…
Admittedly it’s a great deal for Costco when you get down to it, but it doesn’t help you out one bit. After all, the person who pays for their “cut” is you.
So why would Elavon team up with Costco?
Well, that’s an easy one.
They are counting on the “borrowed” trust from Costco’s customers to get them (you?) to sign up without asking too many questions.
What’s more, the sales rep you get referred to is powerless to deliver on any promises they make to you, for the simple reason that their job is to get you to sign on the dotted line.
They don’t make policy, nor can they change the processing rate structure for you.
Even if they wanted to.
If you notice anything “funny” on your merchant account statement, what can you do? In the case of my friend Larkland, when he noticed his rates going up, he called the 800 number on his statement.
A lot of good that did him, right?
In the end, he did sign the contract. And the call center providing “excellent” service said there was nothing they could do.
When you sign the agreement or application, think CONTRACT. And to get out of it, you’ll have to pay an “early termination fee.”
That’s what happened to my friend Larkland. He had to pay an early termination fee to get out of the contract, even though the quoted merchant account rates no longer applied…
How to find the best merchant account provider
These companies know that most people won’t pay the penalty to get out of the agreement.
They figure you’ll come to the conclusion that if Costco can rip you off, everyone and anyone out there will do the same.
You’ll most likely complain, but you won’t act to make a change.
And that’s exactly what they’re counting on. Which is why Elavon can give such a sweet deal to Costco.
I hope you found this information helpful. Please feel free to share your comments below.
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