Collecting rent money every month on time is crucial for landlords. Rent money is typically the primary source of income for many landlords and rental property owners. Therefore, if you have tenants living in a rental unit, it makes sense to use the most convenient and effective method for tenants to pay rent money each month.
What are the best methods to collect rent money to ensure stable rental revenue and uninterrupted cash flow?
Which is the preferred payment method to make it easy for tenants to pay rent online?
Is Rentdrop or PayPal the best online rent collection solution for landlords?
This article compares two popular online payment platforms for rent collection — PayPal and Rentdrop.
Comparing Rentdrop vs. PayPal for Paying Rent Money Online
PayPal is a popular money transfer app that many tenants use to make rental payments for free. On the other hand, Rentdrop is a dedicated payment app for rent payments and collection.
This comparison of Rentdrop and PayPal looks closely at the following features:
- Fees to pay rent by debit card, credit card, or direct deposit
- Costs to landlords to receive rent money online
- Ability to split rent with roommates and co-tenants
- Feature to block a partial rent payment
- Recurring rent payments for tenants
- Rent payment receipts and reporting
- Report rent payments to credit bureaus
- Sending payment reminders to tenants
Comparing the features of PayPal and Rentdrop for collecting rent money online will help you make an informed choice. After all, you want to ensure that tenants find it straightforward to make online rent payments. And you need the tools an online payment solution provides to simplify running your rental property business.
Rentdrop vs. PayPal For Rent Payments — At a Glance
Can You Use PayPal to Send Rent Money?
PayPal makes it easy for tenants to make monthly rent payments. The online money transfer app connects to the tenant’s bank account or debit card. To send the landlord the rent money, the tenant only has to enter the contact details. Then, the money instantly transfers to the landlord’s account.
Related reading: PayPal vs. Venmo for rent payments.
What is Rentdrop?
Rentdrop is a secure, convenient way to make paying rent online easy for tenants and landlords. Tenants can make rental payments by debit card, credit card, or direct deposit. In addition, Rentdrop makes it simple to set up automatic payments, calculate late fees, get rent reports, split rent, and block partial payments.
The Dangers of Accepting Cash for Rent
Accepting cash payments from tenants is risky because the money is easy to lose, mishandle, or get stolen. Other problems with taking rent in cash from tenants include having to deposit the money in the bank account, manually recording it, and they are no payment records, increasing the risk of disputes.
Why Collect Rent Money Online?
Paying rent online makes it the easiest solution for landlords and tenants. First, tenants can pay rent from their mobile phones when it’s convenient for them. Tenants avoid the hassle of mailing a rent check, and landlords don’t have to wait for it to arrive. In addition, online payments are more secure, and it’s easier to track electronic payments.
Payment Apps for Rent Money Collection Online
Using an online payment app is the best way to simplify the rent payment process. Of course, many tenants already use a peer-to-peer payment service like PayPal, Zelle, or Venmo to pay rent. But a dedicated online rent collection app like Rentdrop has more benefits. Comparing PayPal and Rentdrop makes it easier to see why.
Related reading: Alternative to PayPal for rent payments.
Rentdrop vs. PayPal — Costs to Tenants and Landlords
Cost is a significant factor when deciding on a suitable online rent collection method. Subscription fees, bank transfer fees, and other hidden costs can add up over the year. When it’s necessary to cut overheads and reduce unnecessary spending, the cost of using a digital payment solution is a significant consideration.
PayPal Costs to Landlords
Landlords cannot accept rent money through PayPal for free. PayPal transaction fees for landlords can amount to hundreds of dollars a year. This is because using PayPal for a business requires registering a business profile. And PayPal business transaction fees are 3.49% plus a fixed fee for incoming payments.
Of course, PayPal is a free-to-use money transfer app. But only for transferring money to friends and family.
Rentdrop Costs to Landlords
Rentdrop is a fee-free online payment system for landlords. When using the app to collect rent money, you never have any fees to pay. This allows you to accept debit cards and direct deposit payments for free. Rentdrop also lets landlords take credit card transactions without a cost.
Rentdrop works for credit card payments by charging the transaction fee to the tenant, not the landlord. But, of course, tenants can always pay rent with a debit card or ACH bank transfer without incurring any processing fee.
Rentdrop vs. PayPal — Block a Partial Payment
Blocking a partial rent payment is vital when running a successful rental business. When evicting a tenant for non-payment of rent, landlords must have the option to decline a rent payment that is not for the total amount. Otherwise, the eviction process starts again if a tenant can pay part of the rent.
Decline a PayPal Rent Payment
One of the reasons to avoid PayPal for rent payments is that you can’t block a partial payment. Once the tenant authorizes a rent money transfer, it arrives instantly in your account. There is no way for a landlord to decline money on a PayPal transaction.
Block a partial payment with Rentdrop
Unlike PayPal, Rentdrop makes it easy to stop a tenant from making a partial payment. All you need to do is turn on the feature, and the app will decline rental payments not made in full. This feature is one of the most vital differences between PayPal and Rentdrop.
Rentdrop vs. PayPal — Automatic Payments
Automatic payments help reduce late rent payments. Landlords agree that recurring payments take the stress out of rent collection. Tenants can set up an automatic payment schedule and always make payments on time. This has a knock-on effect on your cash flow situation because fewer tenants default on rent.
PayPal Recurring Payments
PayPal doesn’t allow tenants to set up automatic rent payments. This means that the tenant must initiate the rental payment each month — and remember to do this on time. Unfortunately, this increases the risk of forgetting to make a payment, impacting your cash flow and rental income.
The only way that a tenant can make automatic payment on PayPal is if the landlord has set up a subscription option. However, the process can be complicated and may require someone with knowledge of HTML.
Rentdrop Recurring Payments
A handy feature of Rentdrop is automated payment tools that include recurring payments. All tenants must do is enter the rental amount, payment date, and set the schedule. Then they never have to remember about paying rent in the future, and you always get paid rent on time.
Rentdrop vs. PayPal — Automated Late Fees
Setting automated late fees is a standard feature of the best rent collection apps for landlords. However, calculating late fees can be tricky. For example, it’s necessary to calculate the grace period, number of days late, and state rent control laws. Therefore, applying the fee automatically saves valuable time by reducing administration tasks.
PayPal Late Fee Calculation
Because PayPal isn’t a mobile rent payment app, it lacks features like automated late fee calculation. For example, suppose a tenant makes a late payment. In that case, you must manually calculate the appropriate amount. Then, you must send a payment request through PayPal for the late fee amount.
Rentdrop Automated Late Fees
One of the ways Rentdrop saves landlords time is that it has automated late fees. Now, suppose a renter pays late, and you use Rentdrop. In that case, the fee is automatically applied to their balance owed. There are no hassles, no room for mistakes, and no reason to dispute the late fee charge.
Rentdrop vs. PayPal — Rent Payment Receipts
A rent receipt is necessary for landlords to keep track of rent payments from tenants. The remittance slip (electronic or paper form) is proof of rent payment. This vital document helps reduce disputes between tenants and landlords and is also necessary for a tenant’s bookkeeping.
PayPal Rent Receipts
PayPal securely stores records of money sent and money received. This means that landlords and tenants always have a digital record of rent money payments. This method of paying rent is superior to sending a paper check or letting tenants pay rent in cash.
Rentdrop Rent Receipts
Rentdrop has digital copies of rental payments that are accessible to tenants and landlords. However, the benefit of Rentdrop compared to PayPal is that it’s easier to track rent payments from tenants. You can see the payment history of an individual tenant rather than all payments being grouped together.
Rentdrop vs. PayPal — Rent Payment Reporting to Credit Bureaus
Reporting rent payments to credit bureaus has several benefits for tenants and landlords. First, tenants can build a healthy credit history by using rental payments to boost their credit score. Second, tenants have a strong incentive to pay rent on time, knowing the impact a missed payment will have on their credit rating.
PayPal Reporting Rent Payments to Credit Bureaus
Unfortunately, paying rent with PayPal doesn’t have the option to report rent to credit bureaus. However, rent is a tenant’s biggest recurring expense. Without the ability to make every rent payment count, they could find it tough to boost their credit rating. They would then be forced to use a third-party solution.
Rentdrop Reporting Rent Payments to Credit Bureaus
Rentdrop helps tenants build credit by reporting rent payments directly to the credit bureaus (coming soon). This feature is an excellent incentive for your tenants to switch from paying rent by check to using an online payment method. As a result, they will find it easier to get a credit card, buy a car, or secure a mortgage.
Rentdrop vs. PayPal — Payment Reminders to Tenants
Rent reminders are an excellent way to ensure on-time rent payments. They are also an informal way to keep in touch with your tenants. Obviously, there are several ways to send recurring rent reminders, but wouldn’t it be helpful if they were incorporated into the mobile payment method?
PayPal Rent Payment Reminders
There is no option in PayPal to send automatic reminders to tenants. This issue could mean that tenants forget to pay rent on time, impacting your rental income.
Rentdrop Rent Payment Reminders
Automatic rent reminders are a standard feature in Rentdrop. You can easily set up friendly messages when the rent due date is approaching. You also get automatic payment notifications when a tenant pays rent.
Rentdrop or PayPal to Collect Rent Money — In Conclusion
Using an online rent payment system has benefits for tenants and landlords. PayPal makes it easy to pay for utilities and services, including rent. However, PayPal lacks many necessary features for streamlining rent payment and collection. On the other hand, Rentdrop has the simplicity of PayPal when it comes to sending rent money online. In addition, Rentdrop is a fully functional payment solution for landlords and tenants.
There are never any fees associated with collecting rent or paying rent with a debit card or direct deposit. So why not sign up for Rentdrop today to see how easy rent money online really is.