Paying rent with a credit card is a convenient way for tenants to stay up to date with rent payments. Some landlords accept credit card payments through the Rent Collection app, or many tenants prefer to use an online third-party service to pay rent. However, paying rent with a credit card is a useful option for tenants to pay rent on time.
To pay rent despite the benefits of using plastic, many tenants and landlords are embarrassed to pay by credit card. For some homeowners, accepting credit card payments is a hassle they don’t need. Typically, accepting credit card rental payments involves processing fees ranging from 2.5% to 2.9%. At the end of the day, someone – the tenant or landlord – must pay that extra charge.
Paying rent on time is always a fundamental part of being a successful landlord. After all, rent is your primary source of income, and poor cash flow due to late or missed rent payments can severely affect your business. Accepting credit card payments from tenants can be a way to help solve some of the problems associated with rent collection.
What is the reason for persuading a tenant to pay rent by credit card? And once they are on board, what are the best credit payment options?
Benefit of paying rent with credit card
Tenants can benefit by earning using a credit card, getting cash back, or taking advantage of sign-up bonuses. In some cases, having the option of using a credit card can help a tenant pay rent if they are in a tough place. For example, transaction fees are usually cheaper than paydays.
Of course, a responsible landlord should not encourage anyone to create an extra pile of credit cards. And not being able to afford to use a credit card – including monthly rent – can become a bad habit. But for some tenants, a credit card is a useful stop-gap option to pay a rent and avoid potential evictions.
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Ways to pay rent through card
Let’s take a look at some real scenarios where it is understandable to pay rent with a credit card. Some of these options are simpler from a tenant’s perspective, others are more beneficial for landlords.
Specially designed credit cards
Credit card rewards programs are nothing new. However, the newly built MasterCard specifically rewards card members for paying rent – which is probably their most important monthly expense. In addition to earning built-in prizes, there is no fee for the transaction. If, as a homeowner, you do not accept credit card payments, Bilt will send you a paper check.
There are other benefits for tenants to use the reward card scheme. For example, all payments are reported to the credit bureau from time to time, which allows a tenant to create their credit score.
Other reward cards provide tenants with cash back, which can be helpful considering an average monthly rental payment of about 500 1,500 per month. For example, Chase Freedom Unlimited and American Express Cash Magnet are two examples of credit cards that offer 1.5% cashback on most expenses. A tenant can earn about 23 23 a month by paying rent with a card.
Using third party companies
There are several online options for renting land to tenants, even if you do not accept credit card payments. For example, Plastic, Radpad and Renttrack are just three companies that help pay rent.
Typically, these third-party companies charge a transaction fee for each credit card payment. This is an average of 2.99% of each payment. In addition, depending on the company, there may be charges for debit card payments or ACH bank transfers. Some rental payment companies report payments to credit bureaus – it’s easy to increase your tenants’ credit rating.
What about online rental solutions like PayPal, Venmo, or CashApp? Generally, these online payment systems are not recommended for rent payments.
There is no payment protection if the tenant pays into your personal account. Also, a Venmo or PayPal business account imposes a transaction fee for each payment received. Venmo, for example, was a popular way for landlords to collect rent. However, Venmo now applies a 1.9% transaction fee and 10 cents for “products and services”. This means that for many landlords, Venmo is no longer an effective option for free rent.
Rental Collection Apps
Many of the best rental apps and property management software allow tenants to pay rent by credit card. The advantage for landlords is that apps for online rent collection offer tenants multiple options of paying rent. In addition, the tenant pays a transaction fee to pay the credit card, not the landlord.
Many landlords find that using a rental app encourages timely rent payments. Tenants have a choice to pay by debit card, ACH bank transfer, credit card or even e-check. In addition, setting up an automated payment schedule and sending friendly reminders can help ensure that your tenants pay their rent without delay.
In addition to online rent collection, property management apps often have other features for landlords. Processing rental applications online, accepting maintenance requests, collecting security deposits, and accepting flex payments through the app can make your job easier.
Being a homeowner can be fun – if you do it right
No matter how great you are at finding a good rental property deal, you can lose everything if you do not manage your property properly. Being a landlord means night phone calls, expensive evictions, or daily frustrations with ungrateful tenants.
Problems with credit card payments
Of course, there are some problems for tenants when paying rent with a credit card, and paying rent using plastic is not an effective option for everyone. Here are some downsides to using credit cards.
- High transaction fees: Many credit cards add 2% to 3% to each credit card payment. These fees can last throughout the year and can deny any credit card a reward point.
- Profit making: Paying rent by credit card is only valuable if the tenant clears their credit card balance every month. Balance interest rates can rise rapidly if one can only afford to pay the minimum. This can put a tenant in heavy debt and lead to eviction.
- Credit Score: A high credit usage ratio can negatively affect a card user’s credit score. Consistently adding thousands of dollars of rent to a credit card can take the ratio above the ideal 30%.
There are many benefits for landlords if tenants have the option to rent via credit card. Typically, tenants who can pay rent using a credit card pay rent on time, thus improving the landlord’s cash flow. In many cases, tenants also benefit because they can receive additional credit card rewards.