Online Rent Payments: Set a Course for Modern Renting
July 6, 2017
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Switch To Online Rent Payments And Enjoy The Ease Of Modern Renting
Large apartment complexes have been offering online rent payment portals for years. For small to mid-sized landlords on the other hand, giving tenants the ability to pay rent online has been a luxury feature – too expensive for most and not yet demanded by their tenants. But times are changing. A recent study showed that 84% of consumers consider the option to pay bills by credit card a must-have or nice to have. And eCommerce is growing around 15% year over year. Demand is growing, and fortunately for landlords, costs are plummeting. So, independent landlords, it’s time get your feet wet, dive in, and set sail for the world of online rent collection.
ACH or Credit Card?
ACH stands for Automated Clearing House. ACH is a network that inexpensively processes online transactions. Managed and regulated by the Federal Reserve, ACH is an inexpensive and secure way to execute fund transfers. The process is simple: rent money goes from your tenant’s bank account directly into yours – quickly and efficiently. Debits can even be automated monthly. Alternatively, tenants may wish to pay online using a credit or debit card. Credit cards offer well recognized security and speed, and often provide users with rewards points. Unfortunately, they can mean increased fees (but not always! ask us how we handle credit card fees at Innago!). Both options have their pluses and minuses. It’s simply important to give your tenant the choice. In the vast ocean of rental collection, flexibility means feasibility and more on-time collection.
For more info: 5 Reasons You Should Be Accepting Rent With Credit Cards
What About P2P Payments?
Landlords sometimes hear about P2P payments. P2P platforms like PayPal or Venmo are simple and speedy ways for friends to transfer money electronically.
However, because these platforms are built for consumers, not landlords, we recommend you avoid accepting rent via P2P payments. Not only do these options offer you fewer legal protections, but they also come with extra fees and stipulations. For example, unless you provide your tax ID, Venmo is required to withhold 24% of business transactions over $600 in 2023 and send them to the IRS for backup withholding. Because of these legal concerns and general loss of control you get with P2P platforms, it’s best to stick with credit, debit, and ACH for rent payments.
Why Should you Offer Online Payment?
The greatest potential benefit of accepting e-checks and credit cards as payment is the automation it offers. All services are different, so we’ll shamelessly explain the convenience we at Innago can provide.
As mentioned above, tenants can sign up for automated payment, meaning the funds always show up on time, no fingers lifted. From the landlord’s side, deposits are automated as well. You don’t need to click a button to receive your funds; they’re sent immediately and will be received in your account within 24 hours of your tenant’s submission. No longer will you need to keep records by paper and pen, or by sitting for hours in front of a bright screen going line by line, tenant by tenant. Every payment is recorded for you and whenever you need a report, you can have it.
Another major benefit of offering online rent payments is the effect on rent collection. Multiple methods of payment remove any excuse from the tenant. And email reminders ensure that they don’t simply “forget to pay.” Online payments are also significantly faster. With paper checks and cash, you must first wait for the money to arrive, then you have to take it to the bank and again wait, this time for the bank to process it. With online rent payments, the money is sent directly to your account, accessible within one single business day. For many smaller landlords, this is a massive benefit as they often rely on monthly payments to cover their mortgages. With online payments, you’ll be sailing smoothly through the first of the month!
Tenants Want Online Rent Payments
We sometimes hear landlords say that their tenants don’t want to pay online. What they really mean is that the tenants haven’t asked them for the service, and that’s a huge difference. The numbers don’t lie – online rent payments are in demand. According to Entrata (a leading provider of online payments to large cap landlords), 79% of renters prefer to pay rent online. So why aren’t landlords feeling the pressure? It’s simple: you’re the captain of this ship and the rules you set are the rules they follow. If you say you only accept payment mailed by check to a certain location, that’s what they’re going to do.
But again, your tenants want this, and there’s a few reasons why. Believe it or not, if you use trusted and safe partners only, paying online is more secure than paying by check. An Identity Fraud Consumer Report from Javelin Strategy & Research urged consumers to “use online bill pay whenever possible” and also to “enroll in direct deposit.” This is to reduce risk and increase tracking, making identity theft easy to recognize and prevent. And of course, convenience is king. Younger generations in particular are looking for faster, simpler ways to get things done. Paying rent is no exception.
In the past, accepting rent payments online was exclusively for the big fish, but if you choose the right partner (like us!), cost doesn’t have to be a factor. And as demand continues to grow, it’s time for independent guys to set sail into the online payment market and enjoy the ease of automation and payment tracking.