Why You Can Never Use Credit Card for Reno

Many homeowners want to pay for their renovation using credit card.

“Wah, renovation bill so high, if I pay with credit card I can clock rewards, miles, cashback.”

Sounds shiok right?

But the truth is: If you can somehow use your credit card, you’re paying for your own rewards.

Watch our tiktok channel if you lazy to read.

We repeat, you are not earning the rewards, you are paying for your own rewards.

And that might not make financial sense. Here’s why.

How Credit Card Charges Work

Every credit card transaction comes with fees charged to the merchant.

Source: Trynashi

It’s basically a formula, made up of a fixed and percentage fee per transaction.

Generally, its a fixed $0.30 cents + 2.9% per transaction.

That 30 cents is the reason why your 7-11 in Bangkok or even your local mama shop downstairs sometimes have a minimum spend to use credit card.

Imagine you go to your value dollar store and buy a $1 drink. Straight away, the mama shop loses $0.30 in profit.

Doesn’t really make sense for the mama shop to not earn money just to make it “easier” for you to pay right!

Why IDs Don’t Allow It

Source: Trynashi

But the 2nd part, the 2.9% fee, is why (most) IDs don’t allow it.

Interior designers earn on a margin basis.

On average per project, between 20% - 30%. Some as low as 15%, while some as high as 40%, or whatever carrot number they want.

We generally deem 20% to be a very fair and reasonable margin.

Now using that number, if firms allow you to pay with credit card, they essentially take a 15% haircut (3% / 20% x 100).

JUST from the method of transaction, just to make it “easier” for you to earn rewards.

But my ID Firm Allows Leh?

If you are able to pay with credit card, this processing fee is likely be included in the quotation given already.

Simply put, an ID that quotes 40% margin is definitely more likely to allow credit card than 20%.

But do you want to pay an extra $10k in renovation just to “earn” rewards?

Cannot be right?

If I Really Want to Pay with Credit Card?

The only exception now that we know of is paying through Cardup.

But similarly, they charge you a transaction fee (2.1%) to offset the merchant cost.

Then it’s up to you to calculate whether the rewards you earn outweigh the transaction fee you pay.

TLDR

Renovation firms will never accept credit card, because the fees eat into their margins.

If somehow you can, it usually means the fees have already been baked into your quotation.

There are third parties like CardUp but even then, it’s still math - rewards vs transaction fees.

If you are looking to shortlist reliable IDs/contractors for your reno, feel free to enquire here, or check out our blog for other important tips!!