Accepting Rent Payments By Credit Card: Pros and Cons

There are a hundred different questions to consider as a property manager and the biggest always tie back to matters of payment. How your tenants pay rent is a crucial question, and in deciding what methods you accept most renters have to contend with one method in particular: credit cards. Unlike cash or checks, credit cards present a list of pros and cons for property managers looking to be paid. They can be a great way to save time and hassle but also come with their own risks, like chargebacks and fraud. To help you in making the decision for yourself, here are some pros and cons to accepting rent via credit card you should keep in mind.

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Pros:

It’s Convenient: Starting off simple, in the present-day having your tenant pay with a credit card can be very convenient. Most tenants probably have credit cards and with technology like Square becoming more and more prevalent, it’s easier than ever for you to accept rent via credit card. Culturally there’s a massive shift away from paper checks and other banking methods, so it may be easier for everyone involved in the transaction if you accept credit card payments.

They Help You Be Paid On Time: An added benefit to credit cards is that they’re a great fallback for your tenant. If they’re struggling with a rent payment on time many tenants will default to using their credit card and if you accept credit then you get paid! This makes your life way easier, as you don’t have to go chasing down payments or deal with rent arriving late or being “in the mail,” whatever the case may be. For that convenience alone credit card payments can be handy for you as a property manager.

Tenants Pay Fees: This is really twofold, and both parts are in your favor. Most credit cards incur a fee for rental payments that the tenant pays themselves, which is one less concern you have to deal with. Additionally, you can charge a fee for accepting credit card payments in lieu of cash or check, which certainly isn’t a detriment. More money in your pocket never hurts, and accepting credit cards may give you a nice little cash bonus,

Cons:

You Pay Fees: Converse to that last point, unfortunately, credit cards don’t only incur fees to your tenant. Interchange fees are small fees tacked on by banks that can really add up and take a chunk out of your profits as a property manager. Now, you can pass his fee on to your tenants (which is what we mentioned above in charging your tenants a fee), but the added headache may not be worth it depending on your situation.

Chargebacks: The big reason most renters tend to avoid credit card payments is a simple one: the dreaded chargeback. A credit card holder can dispute a charge to their card (such as your rent payment) and — if they can convince the credit card company it’s illegitimate — get it reversed, shorting you your rent money. Unfortunately, some people do take advantage of this, so accepting credit card payments carries the additional risk of dealing with chargebacks from your clients, which is another factor you need to weigh when making the decision on whether to allow card payments.

Payment Delays: Most credit cards have a 3-5 business day delay in processing any charges, which is a delay between when your tenant pays their rent and when you receive it. This can lead to issues such as questioning whether a tenant actually paid their rent on time, and can also make it difficult for you as you won’t have money in hand immediately. However, checks have a similar clear time, so it may not be a dramatic issue in many cases compared with the alternative.

It’s Unnecessary: It may be simple and a bit redundant, but at the end of the day many renters draw the line at necessity, and accepting credit cards isn’t. While it can be incredibly convenient for your tenants, property managers generally have no requirements to allow rent to be paid via credit cards (though this is not always true, like in New Jersey which made accepting rent via credit card state law during the pandemic). Most tenants will still be able to pay rent via cash or check, so if you’d prefer not to deal with the hassle then ultimately it’s your decision.

Credit cards are incredible tools of convenience, but they also come with their own bevy of issues and complications. For renters, accepting credit card payments can make your tenants’ lives easier and expedite easy collection of rent… but it can also incur extra charges and open you to the possibility of fraud. With this list, you’re hopefully better equipped to decide whether or not to accept credit card payments as part of your own property management.