As a landlord, you may have wondered if you should accept credit cards as a form of rent payment from your tenants. Credit cards are convenient, fast, and secure, but they also come with some drawbacks and challenges.
Can Tenants Pay Rent with a Credit Card?
Tenants can pay rent with a credit card only if the landlord has set up a process to receive payments that way. Therefore, not all landlords will accept credit cards, as they will need to use some type of online rent payment or property management software.
Here are some platforms that we recommend:
With plans starting at $0/month, PayRent allows landlords to collect payments either through e-check or credit card. Credit card payments are charged a 3.5% + $2.95 transaction fee. Their platform will also send automated reminders to tenants about paying their rent.
- With no subscription plan and a simple pricing structure, PayRent helps property owners and managers collect rent online safely, reliably and automatically.
- Strength: Rent Collection
Avail doubles as a property management and online rent payment platform. Tenants can choose to pay however they’d like, whether it’s from a bank account or a debit or credit card. Debit and credit card payments are charged a 3.5% transaction fee. Payments are typically deposited directly to your bank within 3 business days. Although, if you subscribe to their Unlimited Plus plan, next-day “FastPay” payments are available at no additional cost.
- Advertise your property, find and screen tenants, sign leases, collect rent, and e-sign custom local leases, with tools built specifically for DIY landlords.
- Strength: Complete Solution
Baselane accepts payments through ACH bank transfer or a debit or credit card. There is a 2.99% transaction fee for debit and credit cards. Tenants are also able to enact reminders for rent or auto-pay, which schedules recurring payments.
- Integrated set of property management tools to help real estate investors and landlords save time and money while increasing their rental property returns.
- Strength: Landlord Banking
Should I Accept Rent Payments from a Credit Card?
Accepting credit cards will depend on the landlord. Credit cards can ensure that landlords will get their rent on time since they don’t have to wait for checks to clear or cash to be deposited. However, accepting rent payments through credit cards may mean that you have to adjust your lease agreement and policies. You may have to specify which cards you accept, how and when tenants can pay with them, what fees you charge or pass on to tenants, how you handle chargebacks and refunds, and what consequences tenants face if they misuse their credit cards.
There may also be increased tenant satisfaction and retention, as tenants can enjoy the convenience and rewards of paying with their preferred method. Landlords can also avoid handling cash or checks and streamline their accounting processes, reducing administrative costs and hassle. Credit cards also offer enhanced security and fraud prevention, as credit card transactions are encrypted and verified by the card issuer.
What Are the Drawbacks of Accepting Rent Payments from a Credit Card?
While providing credit cards as an option is a good way to ensure that rent is paid, there can be drawbacks. Landlords may face chargebacks from tenants who dispute or reverse their payments, which can result in lost revenue and hassle. Additionally, there may be a 3-5% processing fee, but you can always have tenants pay that.
If you accept payments from a credit card, review your lease agreement and policies periodically and update them as needed. Make sure they are consistent with your current practices and expectations regarding credit card payments. If you have any questions or concerns about the legal aspects of accepting credit cards for rent, make sure that you consult a lawyer to avoid legal trouble.
How to Pay Rent with a Credit Card
One of the ways that landlords can accept rent payments through credit cards is by using an online platform. Choose a reputable and reliable vendor that offers online rent payment services. Compare different vendors based on their features, fees, security, customer service, and reviews.
Make sure that you communicate clearly with your tenants about your credit card payment option. Inform them about the benefits and drawbacks of paying with credit cards, such as convenience, rewards points, fees, interest charges, and credit score impact. Educate them about their rights and responsibilities as cardholders, such as reporting lost or stolen cards, disputing unauthorized charges, and paying their bills on time.
Does Paying Rent with a Credit Card Affect Credit Score?
Paying rent with a credit card can increase your tenant’s credit utilization ratio, which is the percentage of your available credit that you use. A high credit utilization ratio can hurt their credit score, especially if they carry a balance from month to month. The Consumer Financial Protection Bureau recommends keeping your credit utilization ratio under 30%. Additionally, paying rent with a credit card can tempt tenants to spend more than they can afford, incurring interest charges if they don’t pay off their balance in full every month. This can lead to debt and financial stress.
How Much Does It Cost to Accept Rent Payments from a Credit Card?
Landlords may have to pay a processing fee of around 3% to 5% for each credit card transaction, which can eat into their profit margin. However, many platforms will apply this fee to the tenants or will give landlords the option of deciding who pays.
Credit Cards vs Cash
Paying rent with a credit card may seem like a convenient option, especially if tenants want to earn rewards, meet a spending requirement, or avoid late fees. On the other hand, paying rent with cash may be more hassle-free and cost-effective, as long as they have enough money in their bank account and can deliver it on time. Tenants will avoid any fees, interest charges, and credit utilization issues that come with using a credit card. However, paying with cash also has some disadvantages. They will not be able to earn any rewards or benefits from using a credit card, such as cash back, points, miles, or insurance. Additionally, your tenants will not have a record of your payment unless they get a receipt from the landlord, which can be useful for tax purposes or in case of a dispute.
Credit Cards vs Checks
While credit cards typically have fees, checks are relatively inexpensive, with an average cost of $3.00 per check. However, tenants may also incur fees for bounced checks, late payments, or stop payments if they use checks. Checks can also take longer to process, especially if they are mailed or deposited at a physical bank. ACH payments, which are electronic checks that draw money directly from checking accounts, can take two to five business days to process.
Paying Rent with Credit Cards: Landlord Gurus Takeaway
If done properly, accepting credit cards for rent can be a win-win situation for both landlords and tenants. It can offer convenience, speed, security, and flexibility for both parties. However, it can also pose some challenges and risks that must be addressed and managed carefully. As a landlord, you should weigh the pros and cons of accepting credit cards for rent before making a decision.
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