Collecting rent on time is one of the biggest challenges that landlords face. Regular and timely rent payments are the lifeblood of your business. Collecting rent each month is crucial for healthy cash flow. So, any solution that reduces late rent payments will benefit your landlord business. But your tenants will also appreciate it if you offer various options to pay rent on time.
Paying rent with a credit card is one option to encourage on-time rent payments. Many tenants prefer using credit cards for paying their bills because they can earn credit card rewards. Other tenants view credit card rent payments as a great backup option if they’re low on funds at the end of the month.
Unfortunately, not all landlords accept credit card payments. Typically, credit card payments are associated with additional transaction fees. In the end, either the landlord covers the transaction fee or passes on the extra costs to the tenants. Despite this fact, if paying rent by credit card can reduce late rent payments, it’s something to think about.
Rent collection apps that offer multiple payment solutions are perfect for tenants and landlords. The apps allow you to collect rent online, monitor tenant payments, and keep up on all your properties without any charge.
Paying Rent with a Credit Card
Rent collection apps such as RentDrop give landlords a choice to allow tenants to pay rent by credit card or debit card. This option is usually in addition to other rent payment methods—paying online, ACH bank transfers, and checks. So, successful landlords offer tenants the option of credit payments as an additional method to pay rent. In our experience, these options significantly reduce the number of late rent payments.
Some online already vendors allow tenants to pay bills, including rent, by credit card—even if the service provider doesn’t accept credit cards. But using these services may not be convenient or accessible to your tenant. However, RentDrop lets you tenants choose how to pay rent—credit card, debit card or ACH bank transfers. Also, for landlords, keeping all rent payments—including credit card payments—in one place is much easier.
Advantages of Paying Rent with a Credit Card
Paying rent by credit card has certain advantages for both tenants and landlords. For landlords, accepting credit card rent payments can mean regular, on-time rent payments. Credit card rent payments also benefit tenants if they earn travel, cashback, or other rewards. Tenants can also use credit card payments to build a healthy credit score.
How to Get Tenants to Pay Rent On-Time with a Credit Card
Successful landlords provide multiple payment options to encourage on-time rent payments. Therefore, you should discourage tenants from paying rent by check, money order, or cash. Of course, some tenants will be keen to pay monthly rent with a credit card; others may be hesitant. In the end, credit card rent payments are an option, not the default position.
Here are four ways you can help tenants use a credit card to pay rent.
1. Highlight the benefits of paying rent with a credit card
Many credit card companies offer rewards for using their services. Some examples are cashback, travel rewards, food rewards, and shopping vouchers. For example, some card companies offer up to five or six percent cash back on purchases. If the average rent is $1,300, a tenant could get between $60 and $70 back.
2. Credit card sign-up bonuses
Some tenants are keen to start using credit cards to pay rent when they learn about sign-up bonuses. For example, some credit card providers offer hundreds of dollars if you spend a certain amount in the first three months. Putting rent payments on the credit card can quickly entitle tenants to a welcome financial payout.
3. Build a positive credit history
The best rent collection apps have features to report rent payments to credit bureaus. However, tenants can also boost their credit score by using their credit card regularly and paying off the monthly balance. Of course, tenants should avoid maxing out on credit cards to improve their credit score.
4. Pay rent on time to avoid late fees
Tenants who have the choice to pay rent with a credit card have a fallback option if they’re strapped for cash.
Here’s a scenario where paying the rent with a credit card makes sense. Let’s say a tenant has unexpected large expenses one month. Because of that, they struggle to cover their monthly costs. Then it’s time to pay rent, but they don’t have enough to pay for it. Now they’ve got to make a difficult choice—make a late payment and then pay late fees or use a credit card to pay rent in full.
How to Collect Rent Paid by Credit Card
The easiest way to give tenants the choice of paying rent with a credit card is to use a rent collection app such as RentDrop. This rental app offers tenants the option of paying rent in several ways—online payments, direct bank transfers, debit cards, and credit cards. With multiple payment options, tenants have more chances of paying rent on time.
When Paying Rent with a Credit Card Isn’t a Good Idea
As a responsible landlord, it’s in your interest to encourage your tenants to act responsibly. Using credit cards to pay rent has its benefits. But, there are also risks to consider. It would help if you reminded tenants that it’s wise to pay off credit card statements fully by the due date. Or at least pay off the rent amount.
Tenants must also consider their credit utilization—the amount of available credit in relation to the credit balance. To keep a healthy credit score, they should keep the utilization ratio below 25 percent, but ideally around 10 percent. This means that if someone has a credit limit of $5,000, the balance should be between $500 and $1,250.
Also, it’s not a good idea if tenants max out on their credit card, leaving them struggling to pay regular expenses or emergencies.
Paying Rent with a Credit Card — In Conclusion
Accepting credit card payments is an excellent way to encourage tenants to pay rent on time. Allowing tenants to pay rent by credit card is a feature of RentDrop—a rent app that helps landlords streamline their property management business.
Other ways that RentDrop can help you run a landlord business include:
- Accept online rent payments
- Automatically pay charge late fees
- Process rental applications
- Carry out tenant screening and background checks
- Credit bureau reporting
- Handle maintenance requests
RentDrop rent collection app is free for landlords and tenants to use.