Charge a credit card fee if the tenant pays with a credit card?

7 Replies

@james It would depend on what your state is and what your lease agreement states. But if you are providing a service and that service is something that costs money then I feel that it is more then fair to charge for that service. Now with that being said you would have fully disclose any fees you are charging to your tenants.

We charge a fee if they do not pay thier rent on-line. if the tenant pays online then we can get the money quicker and be able to pay our owners quicker. If they pay in person at our office we have to have a staff member collect the funds, the accountant has to enter the check into the register of accounts and then get it to the bank and then we have to wait for the funds to clear before we can pay the owner. This all takes staff time and time to get it to the owner which is lost money to them the longer it is not in their account. If there is a way for them to pay online all those steps have gone away. 

I feel that if they do not want to set up online banking or pay with a credit card then they should pay a fee for all the staff time it takes for us to do all those steps. I know it does  not seem like a lot but if you have a business and you intended to scale that business then all those minutes add up.

We manage over 500 homes. If we had our tenants all pay in person the staff time it would take to collect the funds, enter them and then get to the bank. Not even counting the liability of having all that money there in our office which would be prime for a robbery in my opinion. I would need to hire another employee just to process all that, when they can easily set up online pay and all those issues go away.

I know your question was should you charge them and I think if there is any fees that have to be paid for thieir processing then they should pay those. I think the amount of money and time you can save by getting them to do this far outweighs any compensation you would make if you wanted to make it a profit center.

Just my opinion 

@James Phan undefined

@James Phan right now, in Colorado, it is technically illegal. That doesn't stop most of the investors I know, including myself, from passing it onto the tenant. However, hopefully come the end of our legislative session in May, we will have that fixed. As you can imagine, it's not a politically pleasing topic since you are passing that cost along, but 3 or 4% per unit adds up really quick. 

@Rick S.   good post Rick.  Calif prohibits such charge backs, so I would setup my quickbooks to debit "Credit Processing Fees" for every payment by CC.

This is another reason for online payments (like popmoney.com) as there's no  fees for either party as long as you can tolerate the 3-day delay

I haven't dealt with it in a landlord/tenant situation, but from a couple of people I have known who accepted credit cards for their retail businesses, the credit card associations (Visa/Mastercard/Amex) "don't like it" if the business tries to charge the credit card fee to the customer, and can potentially stop accepting charges from that business if they do it.

But, the card associations seem to be perfectly OK with the idea of a business advertising or giving a "cash discount".  In other words, if you want to end up with about $600 in your pocket, you can say the rent is "$620/month, $20 discount for cash".  If the tenant pays you $620 on their credit card, MC/Visa keeps $18 (3%), and you end up with $602.  If they pay you $600 cash, you end up with $600.  Adjust the numbers as needed for whatever rates you can get from the credit card companies.

This is technically against 99% of the merchant service agreements out there.  Read the documentation that comes with your merchant service account (yawn...)

The way I have seen folks work this, however, is to charge a set amount of rent assuming that they will pay by credit card, then offer a discount for cash.

Additionally, there are many services out there that charge a very small fee for bank to bank transfers.  I personally use QuickBooks invoice payment service, IPN, which only charges 50 cents for a bank to bank transfer, but something like 2.75% for a credit card.

Personally, I'm not sure I'd want tenants paying their rent with a credit card.  Could get lots of them in deep water.  However if I had the option, I'd do it as I love the points and cash back on a transaction that big, but it obviously depends on the quality of tenants you have.

Hampshire County West Virginia charges a " convenience fee" if I want to pay my property taxes online with a credit card. I realize all states are different, but if the Man can do it, I should be able to do so as well.