We frequently address questions from merchants currently using the Costco Wholesale Merchant Processing. Costco’s merchant partner is Evalon, formerly Nova Information Systems.

Eariier this year, some Costco member merchant rates were increased, though on the surface it looked like a decrease. It really depends on your business whether you’d be better off or not. In most cases, businesses will pay more.

COSTCO PUBLISHED MERCHANT RATES, April 2010.

Visa/MasterCard Qualified (Traditional Credit & Signature Debit) 1.48% plus $0.20 (reduced)
Visa/MasterCard Qualified Rewards 2.20% plus $0.20 (increased)
Visa/MasterCard Partially Qualified 2.96% plus $0.33
Commercial Non-Qualified 2.96% plus $0.33
MasterCard Non-Qualified 3.80% plus $0.33
Pin-Debit Transaction Fee $0.12

Previous blog readers know these numbers above are pretty meaningless for comparing merchant rates. What really matters is your effective rate. You get the qualified rate when the customer uses their check card and signs for it instead of entering the pin number. Debit card usage is definitely on the rise so the lower rate is a good thing. But how many of your transactions will qualify for the qualified rate vs the other rates? Reference this article for a more important number to use when comparing rate plans.
how to calculate credit card processing effective rate
In addition to the above fees, processors are passing along  .30% or .40% international fees launched in 2009 by Visa and MasterCard, also called cross border service fees. These are fees for foreign issued cards. There’s no way out of this one. Everyone pays it. Since no one knows how many foreign cards you’ll be presented with, it’s usually an extra line item on your merchant statement. I’d be vary wary of any deal that did not separate out these fees.

Based on the April rate changes, I’m staying neutral on processing up to $100,000 annually via the Costco membership plan. Anything over that, I’d look at other options.

Did you think you had a flat rate fee for your American Express merchant account? I did too. But, there are circumstances where they can charge you more. Key entering a transaction at the point of sale is probably the most common.

Per the American Express April 2010 merchant guidelines PDF, “there are instances when Merchants will need to key-enter an In-Person Transaction. This occurs  most often when the POS System cannot read the Magnetic Stripe. There may be a fee assessed for Charges that are key-entered. See subsection 12.2.2,  “authorization fees.”
Transaction  fee - A fee applied to any Charge for which we did not receive the full Magnetic Stripe from the Card and the indicator as to whether the Card was swiped.
0.30% of the face amount of the Charge.

This should not come as a surprise. Visa and MasterCard have long had a different rate for key entered transactions on a RETAIL or swipe merchant account.

” One of the requirements of a key-entered Transaction is to validate the Card’s presence. Failure to
validate the Card’s presence can render the Merchant liable for Chargebacks if the Cardmember
disputes the Charge. “  This doesn’t change for any type of card and we’ve reported on this before.

The FALL 2009 ASSOCIATION INTERCHANGE COMPLIANCE GUIDE included over 100 changes, making it one of the larger updates in recent history. Merchants at the same time were switching suppliers with fever, however the new updates won’t really be felt until the November or December merchant statements are reviewed.

The fall rush to change suppliers is most likely a result of the multiple new Visa fees and the MasterCard brand usage fee added this year, which went into effect April-July. Requirements to qualify for specific interchange rates for International interchange programs are outlined. Many larger merchants will see rates approaching or over 3% when all fees are added, for foreign card transactions. For example, MasterCard
COMMERCIAL DATA RATE II = 2.25 %( US Location w/Global Corporate Acquirer Program Support Fee .55%) . (Non US Issued Cards Only.)

Additionally, as previously reported, new requirements are in effect to qualify for certain B2B credit card transactions. B2B Merchants can expect to see effective rates rising above 3% in the card not present environment.

WORLD ELITE RESTAURANT = 2.20% + $.10
HIGH VALUE RESTAURANT = 2.20% + $.10
ELECTRONIC PAYMENT ACCOUNT DATA RATE I = 2.65% + $.10
ELECTRONIC PAYMENT ACCCOUNT DATA RATE II = 2.40% + $.10

The changes this fall continue to expand the need for merchants to work with processors who provide the following:
- Transparent reporting so the merchant can clearly identify interchange rates qualified for.
- Interchange management- interchange continues to grow more complicated and merchants who best control costs will have a payment processor who helps them with interchange management.
- Flexible Technology to manage interchange- this is probably the single biggest growth area in the payment processing industry as merchants need to get away from static systems and move to smart technology with least cost routing solution.