Landlords Accept Credit Card Payments – Landlords do not accept payments made through credit cards because it costs them money when they accept credit card payments and they are not willing to pay such card processing fees. Landlords usually prefer cash or cheques and avoid credit card payments. There are plenty of people who would like to offer their credit card while paying for the property or rent but are refused. If you are among them, you are not alone because almost all of them have been denied by landlords.
Landlords would like to have payments in the form of automatic withdrawals, cash, cheques that are postdated, and, in some cases, even money order but never in the form of credit cards. Although credit cards are so convenient and efficient still, they are unacceptable. Here are some reasons why landlords do not accept credit card payments:
Credit Card Chargebacks
Landlords who are troubled about collecting rent face a common problem which is credit card chargebacks. Any credit cardholder holds the possibility of disputing a charge especially when it’s something like a rent payment. Credit card chargebacks are meant for solving and preventing issues concerned with stolen cards or fraud but are misused by some people.
However, the charge can be reversed obviously when the landlord can convince the company of the credit card that they haven’t approved of the charge. However, the landlords do not want to take the risk and therefore avoid credit card payments as credit card chargebacks can become a costly business for them.
Issues with the payment date
As for most people, the first day of each month is when the rent is due. Though in some cases it may be due every 3 to 6 months, or two weeks or every week depending on the property owner. Mostly, all the leases have a specific date on which it processes the payment. It does not matter what is the length of it.
All property owners who have rented their properties are relying on this income when they make a budget for their living including their salaries and building maintenance.
This when the concern of landlords comes into play. Credit card companies usually are unable to process the payments on the same date the card is used for making the payment. This means there can be a possible gap of three to five working days or even more till the landlord has the payment in their hands. Now, this could lead to serious problems for property owners who have prepared a budget based on their rental income. Hence landlords do not accept credit card payments.
Doubt on the tenant
When a tenant makes a payment using a credit card, then there are chances that the payment does not process on the time it should be. This could also lead to an assumption that the tenant has not made the payment. Now this assumption can either be right or wrong. Both possibilities are present.
This could lead to an eviction order according to many jurisdictions. There are cases in which tenants have actually made the payments and by the time they are processed, the order for eviction has also gone through resulting in the loss of money, effort, and time of both the tenant and the landlord.
Moreover, at times when tenants want more time to make the payment or are looking for a place to move. Consider claiming that they have made the payment using a credit card when they have not. Tenants blamed the processing time of the credit card payment when they have no intention of paying. Therefore, landlords avoid such risks.
Unaffordable interchange fees
Credit card networks charge fees every time a transaction is made from the business. The same is the case for landlords. Landlords are not willing to get into this costly business lose their money in such interchange fees.
Moreover, when you have to use a credit card machine. You will have to pay for the machine itself and also for the platform’s access. These fees are not affordable for landlords and cut their profits. An interchange fee is charged by almost all credit card companies and is an amount paid by the acquirer. To the issuer to compensate the tenant for the benefits and value that the landlord would receive. When they would accept credit card payments.
You might have noticed that you get a small fee while purchasing an item from somewhere using your credit card. This fee is what the business is giving you as an interchange fee.
The interchange fee has both pros and cons. For bigger corporations such as banks. These fees help reduce the heavy charges they would be required to pay for giving cards to end-users. Whereas, for smaller corporations and entrepreneurs these would be passed on to the one making the payments.
Costly percentage deductions
Every time a payment is incurred on the system, there is a deduction of 2.5 to 5% on the total payment on the business’s accounts. These extra fees are very common. Landlords for example accept about a 500-dollar payment which means there would be a deduction of 25 dollars every month. This would be very expensive for landlords as it would lead to 3 hundred dollars on annual basis.
If a landlord has a big complex then you can multiply it by hundred, two hundred. Even three hundred which means he would lose about thirty thousand to ninety dollars every year. That is a great loss keeping in mind that landlords do not have a big profit margin. A landlord is already bearing the cost of building or apartment maintenance. And losing this much money would mean a lot to them.
Risk of frauds
Another reason why landlords avoid credit card transactions is because of the risk of fraud. Credit card fraud is very common globally. Moreover, there is a chance of identity theft as well. When people steal the identity of others and use that identity to rent a place for them it is known as identity theft.
In such cases, they are most likely to run away immediately by cutting all ties. However, in this case, the landlord suffers as the credit card company reverses the transactions. Moreover, landlords cannot deal with damage or non-payment issues in case of fraudulent credit card use. In such a fraud, mostly the owner of the credit card is considered the true payor.
In such cases, it becomes very hard to find out who is paying and who shall be held responsible for damage or nonpayment.
How to deal with such an issue?
As credit card payment is very convenient most tenants want to pay their rent using this service so that they can also get the rewards and benefits such as cashback programs and travel rewards. This is very tempting for credit card holders as this reduces the payment and also helps in offsetting any extra fees that are charged from you for making rental payments.
For example, you can get as little as 2% rewards from Capital One Venture Rewards and Citi Double Cash. Such rewards can be a lot beneficial if you can limit the extra fees and do not pay interest while paying your full balance.
Moreover, credit cardholders can earn a lot of bonuses when can get a new credit card and fulfill the requirements of spending. A lot of bonuses make you do this in a certain period once you have opened your account.
Unfortunately, some people cannot easily meet these spending requirements without making rental payments. You must keep in mind that some of such bonuses can be exceptional like getting a free flight ticket which is worth hundreds of dollars.
What is the reason for credit card companies charging these extra fees?
As countries are working hard to promote the competition in terms of price among the brands of credit and debit cards in order to boost efficiency, there are various solutions coming up. These extra charges are one way to slow down the increasing costs of acceptance of cards for businesses. This rapidly growing cost includes the interchange cost for Mastercard and Visa rewards.
However, the businesses are obliged to pay the cost of card acceptance to the bank which has nothing to do with the increasing pressure of price on the various brands of cards. What plays an important role here is when businesses ask consumers to pay these extra fees when they pay through debit or credit cards. This creates a competition in price. Hence, customers opt for cards that let them have lower costs.
Charging 2-3% extra helps reduce the cost of the transaction overall as it makes consumers opt for cards that are lower-cost. For example, a customer would more likely choose a card brand that has low or no surcharges required instead of a card that has premium rewards.
Businesses usually complain how they have to pay extra charges when they accept credit or debit cards as payments options. However, as customers we think that it is just another fixed cost of operating businesses including the various others such as energy, taxes, real estate, labor, raw materials, necessary equipment and insurance.
To pay costs when they accept cheques as payment methods
There is no solid evidence of why businesses make surcharges necessary as a reason that they have to pay from their own pockets. Some businesses impose extra fees for other costs such as energy, health insurance and labor as well. Business industries such as telecommunications and rental car follow these practices. Whereas, the airline business adds other surcharges including fuel. These surcharges become so huge that this practice was outlawed by the Department of Transportation.
Moreover, businesses also have to pay costs when they accept cheques as payment methods. When they accept cash, there is still a risk associated with it which is that cash can go missing or get stolen. On the other hand, cheques can be returned if there are insufficient funds. Both cheques and cash require man force to deposit and count which adds to the cost as well.
Many businesses face the same cost as accepting credit cards as a form of payment, while accepting cheques and cash when they calculate on overall basis. This is the reason why businesses accept credit cards because the cost is almost the same in the long run.
In today’s time when the pandemic has affected the world, businesses are more inclined towards accepting debit and credit cards as payment options rather than accepting cash.
Apart from all these reasons, as consumers we are happier with a business when it is accepting all forms of payments, rather than just having one option of payment. Isn’t that right? We all like convenience and most of us are willing to pay a small price of it.
What are the benefits of credit card payments for tenants?
Although, landlords face a lot of consequences when they accept credit card payments. But the benefits of credit card payments cannot be disputed upon. Credit cards are convenient as you do not have to be concerned about having cash in your hand. Moreover, as we all have a problem of keeping track of our finances. Using a credit helps in keeping a useful record of the spending. Some credit card companies also send summaries at the year-end. Which are very much helpful when you are doing your taxation.
In many instances, we need to make some urgent purchases but there is time in getting our salaries. In such case scenarios credit cards are very helpful and can help you make those urgent purchases including paying your rent. This also means you can get an amount of money which you need right away before waiting for your paycheck. However, these cash advances may have greater interest rates so be careful.
Tenants are aware of all these benefits which is why they insist upon using their credit card for payments. But unfortunately credit card payments are not very tempting for landlords.
Debit cards and credit cards both are avoided by landlords
However, debit cards and credit cards both are avoided by landlords. Most of people do not really know how debit cards are different from credit cards. A debit card lets you take out money from your own bank account. While a credit card lets you take out money. Which you borrow from the bank and has to be repaid. However, there are various advantages associated with credit cards such as building good credit and having better security options.
A debit card can be comprehended as plastic cheque in other words. When you use it to buy goods, it draws money from your bank account. This means you can only spend less than or equal to the amount you have in your bank account, not more than that.
Whereas, a credit card acts like a loan that you have to repay at the end of the month. There is a limit for a credit card known as credit limit. This indicates how much you can spend using the credit card. Some known issuers of credit cards are Discover and American Express.
What payment methods are accepted by landlords?
Landlords have a very little profit margin therefore they do not want to waste any of their rental money on unnecessary extra charges. Landlords most likely accept four payment options which are money order, online payments, certified cheques, and cashier cheques. Apart from this cash is their most preferred payment option.
Online payments are also preferable in which landlords are not required to give any personal banking information. Tenants can quickly transfer the amount to landlords and landlords can easily receive the amount with fewer efforts.