Cash rent or online payments? The pros and cons for property managers

Jason Van Steenwyk
| 4 min. read

When you’re chasing down a late rent payment, sometimes, it might feel like it won’t matter what form it comes in: You just need to deposit the money as soon as possible.

But the truth is that it does matter. While cash might be quick, it’s generally a bad idea to accept rent this way, for several reasons.

Why Accepting Rent in Cash is a Bad Idea

It’s Easy to Lose

If you drop your deposit on the way to the bank, there’s no way to get that money bank. Checks can be cancelled and rewritten, and money orders can usually be reissued after 60 days; but lost cash is gone.

It’s Easier to Steal

The majority of leasing and property management staff are honest—but there are exceptions, and there’s no reason to make stealing money easy for them.

It’s a Hallmark of Illegal Activity

Many gainfully employed people receive a large part of their salary in cash: Any person who accepts tips as a part of their paycheck, for example. However, there are risks: James “Whitey” Bulger famously hid out in his Santa Monica apartment for 15 years by paying his rent in cash.

Of course, there are exceptions. But for the most part, property managers and landlords are much better off collecting lower-risk forms of payment. Check out some of the most popular methods below, and their pros and cons.

Pros & Cons of Accepting Card Payments for Rent

Payment Processing Fees

Nearly everyone has a debit card these days, but payment processing fees can be as high as 3%. Square, a popular credit card payment service, charges 2.75% percent per transaction; but if you key the card in instead of swiping, the fee goes up to 3.5%, plus $0.15 per transaction. That means a $1,000 rent payment may cost you between $25 and $35 in fees, making it prohibitively expensive compared to other forms of payment. That is, of course, unless you charge a “convenience fee” to offset your costs (which may be illegal in your state).

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Disputed Payments & Chargebacks

There are also some risks to consider: There are a number of scenarios in which a tenant may dispute a credit card charge, making you responsible for the chargeback. While most processors back their clients up to a reasonable amount, usually this is nowhere near the average rent payment. Square, for example, only backs its merchants up to $250 per month.

Fewer Late Payments & Increased Security

However, the benefits may far outweigh the risks. As mentioned above, accepting cash is risky business; but the convenience of credit cards reduces late payments and is more secure than cash transactions. Furthermore, it’s fairly easy to process a payment with a debit card in person. All you need is a credit card terminal, printer, and PIN pad in your office. Transactions cost between $0.25 and $0.50 per transaction, no matter how large the amount. You’ll see the money in your account in 1-2 business days.

Online Rent Payment Options to Consider

PayPal

Most people have PayPal accounts these days, so it’s very convenient for electronic payments. However, fees are higher than credit card payments, especially for business charges; and you still run the risk of chargebacks like with credit/debit cards.

Money Orders & Cashier’s Checks

While they’re not incredibly convenient for tenants, money orders and cashier’s checks reduce the risk of bounced checks and NSF charges for property managers and landlords. One big drawback is similar to cash: Money orders can be lost—and if the tenant loses it before it gets to you, and they can’t afford another one, you’re out the money.

Electronic Debits

ACH payments are both cost-efficient and convenient. Once your tenant sets up a recurring transfer, you’ll see the money in your account on time every month. Plus, it may only cost you a few dollars per transaction. One drawback is that if there’s not enough money in the account to cover it, the payment will fail (similar to paper checks).

There are so many vendors that will provide convenient online payment options—your property management software may include this for a minimal fee, for example. Within your software, you may be able to set up recurring payments; accept late and convenience fees electronically; and support money order, cash, or check payments too. (Learn more about Buildium’s online payment capabilities!)

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Jason Van Steenwyk

Jason is a freelance writer and editor, as well as an avid fiddler. His articles have been published in a number of real estate publications including Wealth and Retirement Planner and Bankrate.com. He lives in Fort Lauderdale, FL with his cat, Sasha, and an unknown number of musical instruments.

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