Paper or plastic? It’s a term you’re used to hearing at the grocery store but it applies to rental payments as well. Will you accept only paper payments (cash or check) or can a tenant pay rent with their credit or debit card? There has been some hesitation around landlords accepting credit card payments as there is always a risk of a tenant disputing the charge. Could be the risk be worth it? Let’s look at the significant benefits you should also consider before making your decision. 

The most important reason landlords should accept credit card payments is that it gives their tenants more choice and flexibility. Your tenants are your customers so keeping them happy should be a top priority. There are a number of reasons tenants may wish to pay their rent with a credit card. Let’s look at a few:

Benefits to Tenants

  • Cashflow Cushion- The first of the month doesn’t always line up with payday which can put a strain on your tenants to pay on time. Having the option of paying their rent with a credit card can give them some breathing room when it’s between paydays or if unexpected expenses popped up. 
  • Credit Building- Tenants looking to increase their credit score may want to use a credit card as their payment method. Large charges that are paid in full will reflect positively on their credit and give them a boost. 
  • Credit Card Rewards- Many credit card companies offer rewards to their users. In order to qualify for some of these bonuses, users must charge a certain amount to the card in a set period of time. It is common for housing to be a person’s largest expense so charging the amount would allow your tenants that extra push to bonus programs. 
  • Avoid Late fees- Nearly all credit card payments come with a processing fee. For instance, PayRent charges 3.5% of the transaction plus $0.30 to process the transaction. However, these fees can be significantly cheaper than a 10% late fee or a bounced check and overdraft fees.

Benefits to Landlords

Your tenants aren’t the only ones reaping the benefits of credit card payments. Landlords who accept credit card payments are more likely to be paid on time because of the flexibility they are allowing their tenants. The transaction is simple and funds are available sooner than ACH transfers. There is also a clear record of the payment for reference.

But what do you do if there is a chargeback? 

Risk of chargebacks is the reason that many landlords have avoided accepting credit card payments, but it really isn’t as scary as it seems. A non-fraudulent chargeback is what happens when a cardholder disputes a payment. The funds are then pulled back from the account they were deposited to and the payment is investigated. 

When a non-fraudulent chargeback happens, you always have the opportunity to dispute it. You can set yourself up for a positive outcome in a dispute if you’ve prepared well. 

One way to do that is to state the terms and conditions of your rent collection policy clearly in your lease. Be sure to include information about late fees, pet or smoking policies, and lease cancellation policies and procedures. Have your tenant sign the document and initial important clauses. 

Another way to prevent disputes is to provide excellent service to your tenants. If you are slow on necessary repairs then your tenant might have a case. Keep your tenants informed about repairs and make accommodations when necessary. It could save you a chargeback down the line. 

At the end of the day, you know your tenants better than any article on the internet. It’s up to you to decide whether you’d be willing to accept a credit card payment from them. Chances are you already ran a credit check before you accepted them into your property. Just be clear about it in your rent collection policy, arm yourself with important documentation, and provide excellent customer service.