10 Tips for Choosing a Credit Card Processor for Your Construction Company

Tips for choosing a credit card processor for your construction company

Construction businesses have unique needs when it comes to payment processing, so you’ll need to evaluate any potential partner closely. 

“Look for competitive rates, responsive customer service and a proven track record in the construction industry,” said Clark Lowe, president and CEO of the O’Connor Company. “Sometimes, peer recommendations or industry-specific providers can help you make a more confident decision.”

Keep the following 10 tips in mind when choosing a credit card processor for your construction business.

1. Get a merchant account via an ISO/MSP.

There are two primary payment processor types:

• ISOs/MSPs: Independent sales organizations (ISOs) and member service providers (MSPs) are essentially approved merchant account providers. ISOs/MSPs work well for companies that process more than $3,000 monthly and those with varying transaction amounts.
• Merchant aggregators or payment facilitators: Merchant aggregators and payment facilitators sponsor multiple businesses under their master merchant accounts. Businesses that process less than $3,000 monthly may save money by working with this type of processor, as they typically charge a flat rate with no monthly or annual fees. 

2. Be upfront about your transaction amounts and volume. 

When you call for a price quote, the credit card processing service’s sales rep will ask you about your average ticket or invoice size and the dollar amount you process each month. Accurate pricing information will help the rep set up your account correctly if you decide to proceed with that company. If you have an irregularly large transaction coming up or if you anticipate processing a higher volume of transactions in the near future, contact the processor ahead of time for approval.

3. Choose a company that offers month-to-month service.

Processing contracts may include lengthy terms and expensive early termination fees. Before signing with a company, read your contract to verify the term length, cancellation procedures and applicable fees. Ideally, opt for a processor that offers month-to-month service, so you can close your account without penalty if it isn’t a good fit.

4. Request interchange-plus pricing information. 

The interchange-plus pricing model is often advantageous for businesses like construction companies. Many sales reps, however, will quote only the starting rate for tiered pricing (also called the qualified rate) that applies exclusively to regular cards you accept in person. You may have to specifically request an interchange-plus rate.

Tiered pricing is challenging to compare, while interchange-plus pricing information gives you a level playing field for comparing quotes. The pricing model is based on interchange rates — a table of rates set by the card networks — and everyone pays the same amounts. The processors add a markup to the rates, and that’s the rate you’re quoted.

Some sales reps may discourage you from choosing an interchange-plus plan because the company makes less money than with a tiered pricing plan. Others may have prerequisites, such as transaction volume or length of customer tenure, before you qualify for their interchange-plus plans. The best credit card processors, however, offer interchange-plus pricing to all their customers without any restrictions.

5. Learn about credit card processing fees.

Credit card processing fees include monthly statement fees, gateway fees and an annual PCI compliance fee. Many processors may also charge a monthly minimum and often impose costly chargeback fees. Additionally, there are standard incidental fees (batch, voice authorization, AVS, retrieval, and NSF fees) and network fees (APF, FANF, NABU, and data usage).

“Depending on the cards, the payment gateway can swing the rates by 1 percent or more if they use the wrong payment gateway,” said Robert Day, managing partner of weaudit.com.

When you call for a price quote, request a fee schedule. Once you’ve narrowed down the companies you’re considering, ask them each to send you a complete contract to review — including the application, terms of service and program guide. 

Read the entire contract, highlight or list all the fees it mentions and compare it to the fee schedule. If fees weren’t disclosed or seem unusual, ask the sales rep about them and see if they’re willing to waive them. If they are waived, ensure that you receive a waiver or an amended contract.

6. Look for a processor that offers level 2 or 3 processing.

Construction companies frequently work with other businesses that pay using corporate credit cards. When these corporate cards are processed at Level 1, the processing fees are significantly higher. 

Level 1 Processing

• Requires only minimal transaction information to process payments
• Used when accepting credit cards from individual consumers
• Results in higher processing fees when corporate cards are used

Level 2 Processing

• Requires additional transaction data including customer billing address, customer code (or purchase order number), and tax amount
• Designed for business-to-business transactions using corporate cards
• Offers reduced processing rates compared to Level 1 when corporate cards are involved

Level 3 Processing

• Includes all Level 2 requirements plus invoice number and transaction description
• Provides the most comprehensive transaction data
• Offers the lowest processing rates for corporate card transactions

By upgrading to Level 2 or Level 3 processing and providing the required additional transaction details, construction companies can substantially reduce their credit card processing costs. The savings from lower processing rates typically far outweigh the minimal administrative effort required to collect and submit the extra transaction information.

7. Use a processor that accepts high-risk businesses.

From a payment processor’s perspective, construction is a high-risk industry because of the high invoice amounts, irregular payment spacing, numerous industry regulations and the fact that customers may make card-not-present transactions. 

Credit card processing in high-risk industries isn’t appealing to many payment processors. Look for payment companies with experience doing contractor credit card processing, because the companies will be less likely to freeze your account when they see seemingly randomly spaced large sales. 

8. Ensure that payment security is in place.

A payment security breach could have devastating consequences for a contractor. Ensure your processor adheres to the Payment Card Industry Data Security Standard (PCI DSS), which helps protect users and businesses from potential credit card fraud.

9. Ensure that you can accept payments in multiple ways.

Verify that the processor can support payments made in various ways, such as on the go, over the phone and online. Ask your rep whether the processor can facilitate ACH payments and other digital payment methods, such as e-checks, to provide customers with greater flexibility.

10. Ensure that the payment software integrates with your existing software.

Many payment processors integrate with the best accounting and invoicing software, so ensure the processor you choose works with the software you already use. You may even be able to add a payment button to your electronic invoices, allowing your customers to quickly pay online.

How to choose a construction credit card processor

Follow these tips to choose the best credit card processor for your construction business.

Do your homework.

Many credit card companies don’t accept construction companies as merchants because they are considered high-risk. Start your search by eliminating companies that won’t approve you. Next, focus on companies experienced in servicing business-to-business accounts and, ideally, construction companies. Research online and seek advice from reviews and industry peers.

Compare features and pricing models.

Look for processors with low, interchange-plus pricing and low or no monthly fees. Since construction is project-based, you don’t want to pay a high monthly fee when you have little revenue coming in. You also want to avoid a high interest rate on large payments. 

Get demos and custom quotes.

Contact the companies on your shortlist and ask for a software demo. Look for ease of use and the ability to apply deposits and partial payments to customer accounts at set milestones. 

If you like what you see, work with a salesperson to get a custom quote. They will ask you for your average transaction amount and monthly or yearly volume. Use your historical data, but let them know of any potential changes, such as adding smaller jobs or securing a contract with a housing developer.

Compare the quotes.

Compare each part of the quotes you receive, including:

• Processing rate
• Monthly fee
• Incidental fees
• Services offered

Using your historical sales data, run the numbers for each company to gain a complete picture of the total charges and compare them. Weigh the benefit of specific services or features against the costs. Based on that analysis, choose the payment processor that best meets your needs.

Benefits of accepting credit cards for construction work

The Federal Trade Commission advises Americans to pay contractors with a credit card instead of other payment forms. Aside from that consideration, here are additional reasons why accepting credit cards is beneficial for construction businesses:

1. Customers prefer paying with plastic. Credit cards provide consumer protection, making customers feel more confident. Additionally, customers with rewards cards can get cash back or other perks when using their cards. Finally, using a credit card for construction is easier and faster than applying for a home improvement loan. As Day pointed out, “More people can afford to put something on a card they cannot afford to pay for in cash.”
2. Accepting credit cards improves closing ratios. When you can accept deposits at the point of sale, you’ll move the sales process forward and eliminate customers who change their minds.
3. Accepting credit cards facilitates collection. When you send invoices by email, customers can pay with a credit card online, speeding up your collection time and improving cash flow. Credit card transactions are approved or declined on the spot, so you’ll know whether the customer has paid before you begin work.
4. Accepting credit cards facilitates change orders. Jonathan Klem, founder and CEO of Quality Builders, noted that when construction companies accept credit cards, they can accommodate homeowners with change orders not covered by their renovation loans. “We’ve found that for that extra $10,000 to $15,000, it’s good business practice to provide that option,” Klem said. “Splurging on a vanity they really like but is over the allowance for that particular item is one great example of why all construction companies and contractors should give that option.”
5. Most people have a credit card. According to the Federal Reserve’s 2024 Economic Well-Being of U.S. Households report, 81 percent of adults in the U.S. have at least one credit card. Most payment processors also allow you to accept other payment forms used by millennials and Gen Z consumers — such as Apple Pay, Google Pay, Samsung Pay and sometimes ACH.