Costco offers a discount credit card processing solution with it’s partner Nova Information Systems.

Is this a good deal? It really depends on the merchant, their volume and their business set-up. Read the fine print - “Rates listed are for qualified transactions. Reward cards process at a higher rate. ”
What’s a qualified transaction? For the merchant agreement that I reviewed, it is defined as a transaction for a check card ie a debit card. Debit cards have a debit card symbol on them. For most businesses, check cards represent 1-25% of their credit card transactions. That means, the majority of cards presented will not be qualified transactions.

50%-65% of cards presented at consumer retail operations are REWARDS CARDS. This means you need to find out what your rate will be for these as it is likely to be your most common card. If you look at the Costco web site, and most other sites, you do not find out this information until after you complete a ‘pre-application’. The APPLY NOW form almost always includes a disclaimer that the information you are providing is for information only, it is not really an application, because additional information is needed that is not requested in the online forms.

What is the rewards card rate? This can vary depending on your price plan, but with the Nova credit card processing solution, it is a fixed rate, that changes only when there are interchange rate changes.

The Retail and MOTO rates for Costco Members in 2007* were:

Retail / Restaurant:
Qualified 1.64% + $0.20
Qualified Rewards 1.78% + $0.20
Partial Qualified 2.83% + $0.31
Non-Qualified 3.35% + $0.31

Mail/Telephone Order (MOTO) / Internet Accounts:
Qualified 1.99% + $0.27
Partial Qualified N/A
Non-Qualified 3.36% + $0.31

$20.00 Monthly minimum in fees
$.59 Debit transactions
2 Year contract / $95.00 early termination fee

* These rates may since have increased with interchange rate increases.

Based on the information above, the typical transaction for merchants will be 3.36%, since most consumers use Rewards Credit Cards. I’ve seen new businesses paying 4-7% for credit card processing. The Costco deal brings certainty to pricing for start-ups and is certainly lower than some other solutions.

This article should help give you the information needed to compare deals with 3 tiered pricing- qualified, partial qualified (or mid-qualified) and non-qualified. It’s important to get the definitions for each tier, because it may vary by processor.

An established business processing more than $500,000 per year, may benefit from a different type of price plan, one that gives more than 3 price levels.

Are all credit card processing salespeople alike? Of course not.

Do all credit card processing salespeople share the same information with their customers and prospective customers? No.

Nearly everyone I consult with will hear information that NO ONE ELSE has shared with them. Information that makes a big difference in their merchant processing costs. So it is fair that the merchant then goes back to their current processor and says, “hey, I just found out all this stuff and you should be giving me a much better deal. I want this, this and this.” And the merchant processor that has been collecting the biggest fees they could for years suddenly says, ” Oh yeah, I reviewed your account and you qualify for that now.” (That last line is usually just something they make up to save face.)

No it’s not fair, but that’s the world of business. If you can get your current vendor to meet your demands, then you don’t have to change, and we all know that CHANGE can be scary.

Case in point, I recently had a call back from someone I consulted with last year. He went through the motions, got a better deal with his current processor, and is calling me again. The question is why? He wants to save money and he’s not confident his vendor is looking out for him. He didn’t have time to deal with it last year, and yet now he’s going through the entire process again.

The next time you are thinking about doing that to the vendor who brings you the insider secrets, ask yourself these questions.
If I hadn’t brought this to their attention, would they ever have given me a better rate on their own?

What else aren’t they telling me? What might I miss out on later?

Will I really lose my preferred loan and other banking relationship rates if I move my credit card processing?

Can they explain things to me in terms I can understand?

They’ve agreed to make some price changes, but will they provide account services that include regular reviews and account management to ensure I’m hitting the lowest interchange rates possible?

If I stick with the same processor now, am I confident that I will never have to look at this cost center again?

The last two items are the most critical. With our consulting services, you can be confident that you have someone watching out for you, and it will be the last time you’ll ever need to change processors again.