Regular, on-time rent payment is critical in ensuring your business remains profitable and running smoothly. Sometimes, however, rent isn’t paid – from lack of funds, travel, or just forgetfulness. Offering a variety of options might be a good solution to helping your tenants stay on track.
Let’s first start with the old standbys – check and cash. While these can save on processing fees, they do present a few important drawbacks:
A check is a secure and convenient way for tenants to pay in advance and not have to meet you in person. However, if the tenant does not have the funds in their account, you can’t collect and they get fined, further compounding their ability to pay.
While there is no fee required, no chance of a bounced check due to insufficient funds, and it might be easier to manage for tenants without a bank account, accepting cash payments for rent is not a widely accepted practice for several reasons:
The payment isn’t traceable so discrepancies cannot be proven, tax season may be more difficult, and it will require you to make time every month to meet with one or more tenants for collection and to deposit the cash.
In addition, many tenants prefer not to deal with cash or checks. Providing additional options is essential for attracting their business.
Offering the option to pay by ACH, credit, or debit cards can help you avoid the issues mentioned that come with cash and check, but there are a few other benefits as well:
Some banks will allow ACH transfers, but often landlords will use a property management platform to request and accept rent payments, especially if they would prefer the tenant covers the additional cost to pay online. Your tenant can set up their bank account online and the funds are transferred from their bank to yours so that you can avoid physically handling cash and checks.
But just like payments made by check, you may receive a NSF (non-sufficient funds) alert from the tenant’s bank if they do not have the funds to cover the payment.
CREDIT CARD PAYMENTS
Some tenants welcome the opportunity to pay by credit as it could buy some time if they are short on cash one month.
Others will find this an attractive option because they can rack up substantial rewards points this way.
Offering this convenience can go a long way in helping a potential tenant choose your property over another.
DEBIT CARD PAYMENTS
A debit card might be a good middle ground between a check and a credit card.
There is no extra verification period (like for an ACH payment). The funds are transferred quickly and the tenant doesn’t need to have a credit card, just a bank account.
This offers convenience to the tenant and, therefore, more confidence for a landlord that payment will be made on time.