No wholesale discounts with Costco merchant services
Costco is good for lots of things, but a merchant account is not one of them. They use a system called tiered pricing where the interchange fees are broken down into tiers called qualified, mid-qualified, and non-qualified. This may seem simple enough, but the trap is in the simplicity of the breakdown which masks the true cost of processing. Using this tiered pricing scheme Costco engages in a tactic known as bait and switch.
Costco advertises their prices as 1.48% plus a $0.20 transaction fee. This seems like a good price, but what they don’t tell you is that this is just the qualified rate. They never mention other fees, such as the price of reward card transactions which will be significantly higher. Costco chooses to advertise their qualified rate as the bait and by leaving out all of the other fees; it comes as a big shock when the merchant realizes how much they are paying. Costco knows that merchants will eventually realize they got baited into a horrible deal and want to cancel.
In order to make sure they keep these accounts, Costco locks people into long contracts with a pricey cancellation fee. There should be no reason to have a cancellation fee if you are truly receiving honest and competitive rates. Costco also baits people with a three hundred dollar Costco cash card for opening up a new account. Like the saying nothing is ever free, you need to ask yourself what Costco is getting in return for this to pay off for them. They will end up making back that much money in a very short period with their steep rates. Overall tiered pricing, contracts, and cancellation fees are not the way to go. Be wary of anyone offering deals like Costco’s because the fine print and hidden fees can harm small business owners.
