Paying rent by credit card is a convenient way for tenants to keep up with rent payments. Some landlords accept credit card payments through a rental charge app, or many tenants prefer to use an online third-party service to make rental payments. In any case, paying a rent by credit card is a useful option for tenants to pay the rent on time.
Despite the convenience of using plastic to pay the rent, many tenants and landlords shy away from credit card payments. For some homeowners, accepting credit card payments is a hassle they don’t need. Typically, accepting credit card rental payments involves a processing fee ranging from 2.5% to 2.9%. At the end of the day, someone — the tenant or landlord — has to pay these additional charges.
Collecting rentals on time has always been a key part of being a successful landlord. After all, rent is your main source of income and a low cash flow due to late or lost rent payments will severely affect your business. Accepting credit card payments by tenants could be a way to help resolve some of the issues related to rent collection.
What are the reasons to convince a tenant to pay the rent by credit card? And once on board, what are some of the best credit payment options?
Advantages of paying rent by credit card
Tenants can benefit from using a credit card to get rewards, get cash, or take advantage of a sign-up bonus. In some cases, having the option to use a credit card can help the tenant pay the rent if it is at a reduced point. For example, the transaction fee is usually cheaper than a payday loan.
Of course, a responsible homeowner should not encourage anyone to build a lot of credit card debt. And using a credit card to pay for things a person can’t afford (including monthly rent) can become a bad habit. But for some tenants, a credit card is a useful option to avoid disbursement of rent and possible eviction.
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Ways to pay the rent by card
Let’s look at some viable scenarios where it makes sense to pay the rent with a credit card. Some of these options are useful from the tenant’s point of view, while other alternatives are more beneficial to landlords.
Specifically designed credit cards
Credit card rewards programs are nothing new. Still, the new Bilt Mastercard specifically rewards card members for paying the rent, which is probably the most important monthly expense. In addition to earning Bilt rewards, there is no transaction fee to worry about. If, as an owner, you do not accept credit card payments, Bilt will send you a paper check.
There are other benefits for tenants to use a reward card plan. For example, all one-time payments are reported to credit bureaus, allowing a tenant to get their credit score.
Other reward cards offer cash to tenants, which can be helpful considering that the average monthly rent payment is about $ 1,500 a month. For example, Chase Freedom Unlimited and American Express Cash Magnet are two examples of credit cards that offer a 1.5% cash back on most spending. A tenant could earn about $ 23 a month just by paying the rent with a card.
Using third party companies
There are several options online for tenants to pay rents to landlords, even if you do not accept credit card payments. For example, Plastiq, RadPad and RentTrack are just three companies that help facilitate rent payments.
Typically, these third-party companies charge a transaction fee for each credit card payment. This represents an average of 2.99% on each payment. In addition, depending on the company, there may be charges for debit card payments or ACH bank transfers. Some rental payment companies also report payments to credit bureaus, useful for your tenants to increase their credit rating.
What about online rental payment solutions like PayPal, Venmo or CashApp? In general, these online payment systems are not recommended for paying rent.
There is no payment protection if the tenant pays into your personal account. In addition, a Venmo or PayPal business account hits transaction fees for each payment received. For example, Venmo was a popular way for landlords to collect rents. However, Venmo now applies a 1.9% transaction fee plus 10 cents for “goods and services”. This means that Venmo is no longer a viable option for many landlords to charge rent for free.
Rent collection apps
Many of the best rental collection apps and property management software allow tenants to pay the rent by credit card. The advantage of landlords is that online rental payment apps offer tenants several options to pay the rent. In addition, the tenant pays any transaction fees for credit card payments, not the landlord.
Many landlords believe that the use of a rental collection application favors timely payment of rent. Tenants can choose to pay by debit card, ACH bank transfer, credit card or even eCheck. In addition, setting an automatic payment schedule and sending friendly reminders can help ensure that your tenants never arrive late with the rental.
In addition to collecting rent online, property management applications often have other functions for landlords. Processing online rental requests, accepting maintenance requests, collecting security deposits, and accepting flexible payments through the app can streamline your work.
Being a homeowner can be fun, if you do it right
No matter how great you are at finding good rental property deals, you could lose everything if you don’t manage your properties properly. Being a landlord doesn’t have to mean midnight phone calls, costly evictions, or daily frustrations with ungrateful tenants.
You choose to pay by credit card
Of course, there are some pitfalls for tenants when paying rent with a credit card and using plastic to pay the rent is not a viable option for everyone. These are some of the drawbacks of using a credit card.
- High transaction fees: Many credit cards add up to 2% to 3% for credit card payments. These fees can be added throughout the year and can cancel your credit card reward points.
- Interest payments: Paying the rent by credit card is only worth it if the tenant clears the credit card balance each month. Interest rates on balances can rise rapidly if someone can only afford the minimum payment. This can cause a tenant to have significant debt and be able to evict.
- Credit score: A high credit usage ratio can negatively affect the credit score of the card user. If you constantly add thousands of rental dollars to a credit card, you can increase the ratio by over 30% ideally.
There are many benefits for landlords if tenants have the option to pay the rent by credit card. Typically, tenants who can pay the rent using a credit card pay the rent on time, thus improving a landlord’s cash flow. In many cases, the tenant also benefits because they can get additional rewards with their credit card.
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