Can Contractors Charge a Credit Card Fee on Progress Invoices?

On this page 8 sections

1. Can Contractors Charge Credit Card Fees? The Short Answer
2. Surcharge, Convenience Fee, or Cash Discount: Which Fits a Contractor
3. Card Network Rules: Caps, Registration, and Debit Card Exclusions
4. States That Restrict or Ban Credit Card Surcharges
5. Disclosing the Fee in Your Home Improvement Contract
6. Applying Surcharges to Deposits, Draws, and Change Orders
7. Pushing Large Payments to ACH Instead of Cards
8. Next Steps for Contractors

Key takeaways

• A credit card surcharge on a progress invoice can be allowed, but only within card network rules, state law and the terms disclosed in your home improvement contract.
• Surcharges generally apply to credit cards only. Debit and prepaid cards are treated differently, so your billing system has to tell them apart.
• Put the card fee policy in the contract, every draw invoice and every change order so homeowners are never surprised mid-project.
• For the largest draws, offering ACH or check can lower your costs and reduce disputes without adding a fee.

Can contractors charge credit card fees on progress invoices? Often yes, but the answer depends on how the fee is structured, which card the homeowner uses, what your state allows and what your contract says. This guide explains how surcharge caps, state restrictions, debit card exclusions and home improvement contract disclosures apply when you add a card fee to a deposit, a draw or a change order. It also covers when moving large payments to ACH makes more sense.

This article is general information, not legal advice. Surcharge rules and home improvement contract laws change and vary by state. Confirm your plan with a qualified attorney and your payment processor before you bill.

Can Contractors Charge Credit Card Fees? The Short Answer

A remodeler, roofer or general contractor may be able to pass card costs to customers through one of three structures: a surcharge, a convenience fee or a cash discount (including dual pricing). Each has its own rules, and they are not interchangeable.

Contractors face a few complications that a coffee shop doesn't:

• Large tickets. A single draw on a kitchen or addition can be many times your typical card transaction, so the fee is visible and easy to question.
• Multiple payments per job. A fee policy has to hold up across a deposit, several draws, change orders and final payment.
• Consumer protection laws. Many states regulate home improvement contracts, including how payment terms are written.
• Mixed payment channels. Some payments are keyed in from the office, some are paid through an online invoice link and some are tapped on a terminal at the jobsite.

Surcharge, Convenience Fee, or Cash Discount: Which Fits a Contractor

When a Surcharge Makes Sense

A contractor credit card surcharge fits when most homeowners pay by check or ACH and only some want to use a credit card for points or float. The surcharge applies only to the credit card payments. Ask your processor which disclosure and notice steps it handles, and see how MannyPay's surcharging program works where surcharging is permitted.

When a Cash Discount or Dual Pricing Is Simpler

A contractor cash discount reverses the logic. Your contract price already reflects the cost of accepting cards, and homeowners who pay by check, cash or (depending on how your program is structured) bank transfer receive a discount. Because nothing is "added" for card users, a cash discount can be easier to explain and is generally treated differently from surcharging. See how a cash discount program or dual pricing on invoices works. Either way, the discount has to be real and disclosed, not a relabeled surcharge.

Why Convenience Fees Rarely Fit

Convenience fees are generally meant for a channel that's an alternative to your standard way of accepting payment, and card network rules restrict how they're applied. If your invoices normally go out with a "pay by card" link, that is not an alternative channel. Ask your processor before using this label.

Card Network Rules: Caps, Registration, and Debit Card Exclusions

Visa, Mastercard, American Express and Discover each publish their own rules on surcharging. They are long and they get updated, so treat the points below as an overview and confirm the current details with your processor.

Surcharge Caps

Card networks limit how much you can surcharge. In general, a surcharge can't exceed your actual cost of accepting the card, and the networks also set a maximum. The exact cap and how it's calculated differ by network, and state law may set a lower limit. Don't pick a percentage just because a competitor uses it. Base it on your real processing costs and the current rules.

If you aren't sure what your real cost is, start with what contractors typically pay. Our breakdown of contractor credit card processing fees for remodelers covers the components. For commercial jobs paid with corporate cards, see our guide to Level 3 processing for contractors.

Registration and Notice

Some networks require merchants to notify them, or their acquirer, before they start surcharging. Ask your processor whether this is part of its setup process. Starting to surcharge on your own, by adding a line to a QuickBooks invoice for example, can skip this step.

Debit and Prepaid Card Exclusions

This is where contractors most often get tripped up. Surcharges generally apply to credit cards only. Debit cards are excluded, even when the homeowner chooses "credit" at the terminal or enters the card into an online form. Prepaid cards are generally treated like debit.

In practice, you need a terminal, virtual terminal or gateway that can identify the card type so the surcharge is applied only when it is allowed. Manually adding a fee to every card payment is the fastest way to surcharge a debit card by mistake.

Keyed and Online Payments

Keyed payments taken over the phone and online invoice payments usually cost more to process than chip or tap payments. Our guide on why keyed and online transactions cost more explains why. That higher cost doesn't change the cap. It's one more reason to know your blended cost before setting a fee.

States That Restrict or Ban Credit Card Surcharges

State law on surcharging has shifted over the years. Some states have prohibited surcharges, some have overturned their bans or seen them challenged in court, and others allow surcharges with their own disclosure or cap requirements. A few states have added rules aimed at specific fee practices or industries.

Because the list changes, this guide doesn't name states. Before you add a surcharge on a construction invoice:

1. Check the law in the state where the job is located, not just where your office is. This matters if you work across state lines.
2. Check whether your state treats a cash discount differently from a surcharge.
3. Check whether your state's home improvement or consumer protection statutes say anything about added fees.
4. Ask your processor to confirm whether surcharging is permitted for your account and location.
5. Get written confirmation from an attorney if you're relying on a recent law change.

If a state prohibits surcharging, a properly structured cash discount or dual pricing program may still be an option. Confirm that with counsel too.

Disclosing the Fee in Your Home Improvement Contract

Whether a home improvement card fee is legal often comes down to disclosure as much as the fee itself. Many states require written home improvement contracts with clear payment terms, and some regulate how deposits and progress payments are scheduled. Some states also limit how much you can collect up front. See our explainer on California's contractor down payment limit for one example. For other invoice line items, see our guide on whether contractors charge sales tax on lump-sum vs. time and materials jobs.

Where the Fee Should Appear

• Proposal or estimate. State the accepted payment methods and the card fee or cash price upfront.
• Signed contract. Include the fee terms in the payment schedule section, not buried in fine print.
• Each draw invoice. Show the base amount, the surcharge as its own line and the total for card payment, or both the card and cash prices.
• Change orders. Restate that the same payment terms apply.
• At the point of payment. The terminal, payment link or virtual terminal checkout should show the fee before the customer approves it.

Sample Contract Language (Illustrative Only)

Payment methods accepted: check, ACH bank transfer and major credit and debit cards. Credit card payments are subject to a surcharge, shown separately on each invoice, that does not exceed our cost of acceptance. No surcharge applies to debit card, check or ACH payments.

Have your attorney adapt any language like this to your state's home improvement contract requirements.

Applying Surcharges to Deposits, Draws, and Change Orders

A fee policy that works on one invoice can fall apart over a six-month job. Apply it the same way every time. Our guide to collecting milestone payments with a construction draw schedule covers the schedule itself, and our guide to getting paid for construction change orders covers billing for extra work. For the final holdback, see our guide to how contractors get retainage paid. Here is how card fees fit in.

Illustrative Draw Example

The numbers below are illustrative only. No specific surcharge rate is implied or recommended.

Practical Rules for Each Payment Type

• Deposits. If a job is canceled and you refund the deposit, the networks and your processor have rules about refunding the surcharge portion. Confirm the process before you need it.
• Draws. Calculate the surcharge on the draw amount being paid by credit card, never on the full contract balance.
• Change orders. Bill the surcharge only when the change order is paid by credit card, and only under the terms the homeowner already agreed to.
• Split payments. Apply the fee only to the credit card portion.
• Retainage. When retainage is released, the same terms apply to that payment.

Watch Your Lien Waivers

A card payment can be disputed after you've received it. If you issue lien waivers with each draw, think about timing. Our guide to conditional vs. unconditional lien waivers explains when to sign each.

Pushing Large Payments to ACH Instead of Cards

Instead of charging a fee on a large draw, you can steer it to a cheaper payment method. ACH bank transfers usually cost less than card payments, and they don't carry card-style chargebacks, although ACH returns can still occur. If a roofing job is being paid from an insurance claim, see our guide on what to do when a roof insurance check is made out to the mortgage company. For collecting the homeowner's share on those jobs, see our guide on whether roofers can waive the deductible under state law.

Large card payments can also trigger risk reviews. If a big remodel deposit suddenly runs on your account, your processor may pause it for review. Our guide to why processors hold funds on large remodel deposits explains what triggers this and how to prevent it. To spot the warning signs of fraudulent large deposits, see our guide to contractor overpayment scams involving fake checks and card refund fraud.

A practical approach to consider:

1. Accept cards for the deposit and smaller draws.
2. Encourage ACH or check for the largest draws, and say so in the contract.
3. Tell your processor in advance about your typical ticket sizes so large payments don't look unusual.
4. For homeowners who need more time to pay, compare financing options instead of putting a large draw on a card. See how to compare home improvement financing programs.

For office-keyed and phone payments, look for a virtual terminal or gateway that can identify debit cards and apply your fee structure automatically, and confirm this with your processor before you rely on it. See MannyPay's virtual terminals.

Next Steps for Contractors

Before adding a card fee to your next progress invoice:

• Choose one structure (surcharge, cash discount or dual pricing) and use it on every job.
• Confirm current network rules and state law for each job location.
• Update your proposal, contract, invoice and change order templates.
• Confirm that your terminal, gateway or virtual terminal can identify debit cards.
• Decide which draws you'll steer toward ACH.

MannyPay offers surcharging where permitted, cash discount, dual pricing and zero cost processing programs designed to help eligible merchants offset card-processing costs, along with terminals and virtual terminals for jobsite and office payments. Results depend on your business and setup. Request a free quote, and a MannyPay specialist will respond within one business day.

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About the author

MannyPay Editorial Team

Beyond the Swipe's editorial desk researches the publication's guides and news and cites its sources in every article. Articles reviewed by a named MannyPay editor carry that editor's byline.

This article is for general educational purposes and is not legal, tax or financial advice. Card network rules and state laws change; confirm current requirements for your business.