Cash, checks, and money orders are the most common payment methods accepted by landlords. Although some landlords accept rent payments online through PayPal and debit cards, most don’t accept credit card payments.
If you’re wondering whether you should accept credit card rent payments from your tenants, the answer depends mostly on your need for convenience and your willingness to pay the fees.
Credit card rent payments are convenient for tenants and landlords
There’s nothing easier than paying rent with a credit card online. Just punch in the numbers and a few more details and you’re paid up. The convenience is great for you as a landlord, too. Even your property manager will benefit from online rent payments. Property management companies thrive on providing the best possible service to landlords, and credit card payments make rent collection automatic.
Convenience and automation are great, but there are other factors to consider before deciding to accept credit card rent payments.
Fees: the downside to accepting credit card rent payments
Convenience comes at a price; allowing tenants to pay rent with a credit card will cost you extra money. No matter who processes your credit card rent payments, the credit card companies will charge a fee. You’ll be charged whether you pay that fee directly through your own payment account or if you use a third-party payment processing service.
Although you’ll pay extra to process credit card transactions, it might be worth the cost. It really depends on your individual circumstances. For example, if you live out of state and don’t want to wait for out-of-state checks to clear, credit card transactions will show up in your account almost immediately.
Even if you’re willing to accept the fees for credit card payments, you have to think about why a tenant might want to pay rent with their credit card. While some tenants might simply want to automate all of their recurring expenses, some tenants might be in financial trouble.
Paying rent on a credit card is usually a bad sign
There are a variety of reasons a tenant might want to pay their rent with a credit card. Although good reasons exist — like using rent payments to earn rewards points on their card — the desire to pay rent with a credit card is usually a bad sign.
When a tenant uses a credit card to pay rent, it can be a sign of financial difficulties. After paying the current month’s rent, they may not be able to pay the subsequent month’s rent, and you could end up having to process an eviction.
Don’t announce that you’ll accept a rent payment on a credit card
If a tenant makes a special request to pay the rent with a credit card, make it a last resort option. If a tenant can pay the rent several days late with a check or cash, that would be preferable to accepting a credit card payment.
The good news is that most tenants won’t want to use a credit card to pay rent. You don’t need to offer this option to your tenants. You won’t deter potential tenants or lose existing tenants by not accepting credit card rent payments.
Be flexible with your tenants, but ask questions
It’s important to be flexible with your tenants, especially if they’ve been a good tenant for a while. However, don’t just blindly accept credit card rent payments. If a tenant wants to pay rent with their credit card, ask them if there’s a specific reason they want this special option.
If your tenant tells you they’re trying to build credit, that’s a good reason to put their rent payment on their credit card, especially if you don’t report rent payments to the credit bureaus.
Instead of accepting a credit card payment, you could offer to report their rent payments to the credit bureaus to help them build credit. However, they may still want to build credit with their credit card. In that case, there’s probably no harm in allowing the credit card payments.
Use your discretion
If you’re willing to accept the fees and feel comfortable accepting credit card payments for rent, go for it. However, use your discretion and discernment.
To reserve your right to reject requests to pay rent with a credit card from tenants you suspect are in financial trouble, don’t advertise credit card payments as an option. Only allow it on an individual basis when a tenant makes the specific request.
