Gone are the days when only big retail establishments accepted credit cards. Today, paying with credit is an easy, often preferable means of paying for most everything, including monthly living expenses, even rent. For people who view the process of writing a check and dropping it into the mail as archaic, payment via credit has become the go-to means of managing their finances.
So, yes, accepting rent payments via credit card is possible for all shapes and sizes of businesses and individuals. And this option offers several advantages to both parties, which we will address below. And after that, we will tackle the should of accepting payment via credit cards.
The PROS:
Offers flexibility to the renter and perhaps a cheaper option than a late fee. Who hasn’t experienced a month where the cash doesn’t quite stretch to cover the bills? Rather than allow the rent to become overdue and incur a late fee, the option to make the payment with a credit card gets the money to the landlord on time. In addition, the vendor fee minus the cashback/reward points earned on the card may amount to less than the late fee charged by the landlord.
Love those points. Paying regularly occurring bills with a credit card can wrack up the points or help folks meet levels to achieve one of those hefty sign-on bonuses with a new card. However, credit card processing fees may be higher than the value of the points received.
Convenience on both sides of the table. Funneling all expenses through a credit card and then making one big payment when the statement comes due offers a near hassle-free way to manage one’s money. So much less time-consuming than paying half a dozen recurring bills each month and tracking a bunch of debit card expenditures. And what landlord wouldn’t love an email announcing money has been deposited in their account?
Additional benefits to landlords include an uptick in on-time payments. It makes sense that the more options offered for making those monthly payments—credit/debit card, check, cash, ACH—the more likely tenants are to stay current on the rent. Additionally, a growing number of tenants appreciate tech-savviness in landlords. They want tech-friendly options and will tend to stay put because their payment needs/wants are being met, significantly boosting tenant retention rates.
The CONS:
Processing Fees. Credit card transactions incur hefty processing fees. For businesses that sell a product or service, this fee is already priced in and the merchant pays the cost. Rent, however, is a bit different and a typical 3% processing fee is something a landlord is not willing to incur. For example; a 3% fee on a $1500 rent would be $45…ouch!
Disputed Charges. Credit card transactions can be disputed by the consumer well-after the charge date. If a landlord has accepted a credit card payment for rent, then they run the risk of having the transaction disputed later and possibly incur a loss if the dispute is successful.
Promoting Irresponsible Habits. For all the streamlining and convenience it provides, some people still question whether accepting rent payments via credit card is an open invitation to irresponsible spending habits. Paying for rent on credit can be a recipe for disaster if not handled right.
So, should landlords offer the option of rent payment via credit cards? Savvy consumers continues to lean toward automation, and landlords would do well to include rent payment options that align with this penchant for convenience. This may include credit cards, but ACH or other direct pay options work well too and don’t carry the same risks and fees.
About Rentals America
Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management and we’re here to help landlords navigate the rental market.
