Selecting a credit card processing company presents a unique set of challenges when you own a construction business. Because of construction's project-based nature, payments are often large and intermittent. Plus, you may want to accept card payments in various ways to make it convenient for clients to pay you. For example, in addition to accepting credit card payments over the phone and in person, you may want to accept card payments online via invoices and in the field using a mobile POS system connected to your phone.
While much of the information here can apply to any business, we'll look at special considerations for construction businesses when choosing a credit card processor, including what to look for in contracts, rates and fees.
Here are seven tips for choosing a credit card processor for your construction business.
1. Get a merchant account.
There are two main payment processor types. Most processors are ISO/MSPs that you can set up with your merchant account. This type of processor is best for companies that process more than $3,000 per month and those with varying transaction amounts, so it's likely the best fit for your construction business.
The other type of processor is a merchant aggregator or payment facilitator. These companies sponsor multiple businesses under their master merchant accounts. Businesses that process less than $3,000 per month may save money by working with this type of processor because it usually charges a flat rate with no monthly or annual fees. However, aggregators tend to be more risk-averse than ISO/MSPs, and irregular transaction amounts can trigger a fraud alert that causes the processor to freeze your account.
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2. Be upfront about your transaction amounts and volume.
When you're calling for a price quote, the credit card processing service's sales rep will ask you what your average ticket (invoice) size is and the dollar amount you process – or anticipate processing – each month.
It's important to be as accurate as possible with these numbers so the rep can give you accurate pricing. And, if you decide to proceed with the company, this information will help the rep set up your account correctly. If you have an irregularly large transaction coming up, or if your business is busier than average and you anticipate processing a higher volume of transactions, you can call the processor ahead of time to get approval.
3. Choose a company that offers month-to-month service.
When it comes to a contract, you're seeking the same quality other small businesses look for in a payment processor: no lengthy terms. This is important because if the processor's services end up not being a good fit for your business, you can close your account without penalty.
Processing contracts typically have three-year terms and charge expensive early termination fees if you cancel the service before the term expires. It's important to read the contract to verify the term length, cancellation procedure and applicable fees before signing with a company.
When you request the contract to review, the sales rep may send the application only; however, this is only one part of the contract, so you may need to specifically request the terms of service and program guide. The program guide is typically where the information regarding the cancellation policy resides.
4. Request interchange-plus pricing.
Industry experts recommend the interchange-plus pricing model. However, many of the sales reps you call will quote you the starting rate for tiered pricing – also called the "qualified rate" that only applies to regular cards you accept in person – so you may have to specifically request an interchange-plus rate.
Some sales reps may discourage you from choosing an interchange-plus plan because the company makes less money with it than with a tiered pricing plan. Others may have specific prerequisites before you qualify for their interchange-plus plans. For example, they may require you to process a certain transaction volume each month or be a customer for a certain amount of time. However, the best credit card processors offer interchange-plus pricing to all their customers without these restrictions.
Another reason to opt for interchange-plus pricing is that it gives you a level ground for comparing quotes. This pricing model is based on interchange – a table of rates set by the card networks – and everyone pays the same amounts. The processors add a markup to these rates, and that's the rate you're quoted, so you can easily see which companies offer you the lowest rate.
Tiered pricing is difficult to compare because processors add markups to the interchange rates and then sort them into tiers. The number of tiers and the types of cards and transactions sorted into each one vary by processor. However, many have three tiers for credit and debit cards: qualified, mid-qualified and nonqualified.
5. Find out about fees.
Credit card processing fees include monthly statement and gateway fees, plus an annual PCI compliance fee. Processors will also charge a monthly minimum. Additionally, there are standard incidental fees (batch, voice authorization, AVS, chargeback, retrieval and NSF fees) and network fees (APF, FANF, NABU and data usage).
When you call for a price quote, request a fee schedule. Once you've narrowed down the companies you're considering to your top three or four choices, ask them 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 sound odd, ask the sales rep about them and see if they're willing to waive them. If they are waived, ensure you receive a waiver or an amended contract.
6. Look for a processor that offers level 2 or 3 processing.
When you accept a credit card from a consumer, it's processed as a level 1 transaction, which requires minimal information to process. However, if your clients are often other businesses, and they pay you using corporate cards, you'll pay higher processing rates unless you provide the processor with additional data about the transactions.
For level 2 processing, you'd need to provide your customer's billing address, customer code (or purchase order number) and tax amount. For level 3 processing, you'd also need to include an invoice number and a description.
7. Use a processor that accepts high-risk businesses.
From a payment processor's perspective, construction is a high risk because of the high invoice amounts, irregular payment spacing, number of 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, as these companies will be less likely to freeze your account when they see seemingly randomly spaced large sales.
When you're talking with a sales rep, verify that the processor can set you up to accept payments in various ways: on the go, over the phone and online. You also want to see if the processor can support you with accepting ACH payments and other electronic payments, such as e-checks, which gives customers more flexibility.
Many payment processors integrate with the best accounting and invoicing software, so be sure the processor you choose can work with the software you're already using. You may even be able to add a payment button to your electronic invoices, helping your customers quickly pay online.
Recommended credit card processors for contractors and construction
Here's a glance at credit card processors that work well for contractors and construction businesses.
|Company||Pricing||Monthly fee||Good because|
|Fattmerchant||Interchange-plus or flat monthly price subscription model||Monthly plans starting at $99||Low rates; online invoicing and recurrent billing|
|ProMerchant||Interchange-plus with monthly fee or flat rate||Custom quote required||Accepts high-risk merchants; quick approval decision|
|Payment Depot||Interchange-plus||Plans $49-$199 per month||Accepts high-risk merchants; good for high volume; mobile processing|
Why accept credit cards for construction or renovation work?
The Federal Trade Commission advises Americans to pay contractors with a credit card rather than other forms of payment. Aside from this consideration, it's important to understand why your construction business should accept credit cards. Here are a few reasons:
- Customers prefer paying with plastic. If your construction business is old school and accepts only cash and checks, you may be unintentionally turning away business. 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.
- It 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.
- It facilitates collection. With existing projects, when you send invoices by email, customers can pay with a credit card online, thus speeding up your collection time and improving your 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.
- Most people have at least one. Overall, 90% of U.S. adults have a credit card. While younger people are slightly less likely to have a credit card, most payment processors 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.
Jennifer Dublino contributed to the writing and research in this article.