Are Your Rental Home Payments Millennial-Friendly?

Ever wonder why paying rent by check is still by far the most preferred method? Maybe it’s really not preferred, but it’s the top method for three reasons reported by survey:

  • Old habits die hard – One report says that more than 20 billion checks were written in 2015 to pay bills. Some might say that “if it ain’t broke, don’t fix it.”
  • Online checks accepted – The vast majority of private landlords only accept rent payments by check.
  • Renters like control & shrinking float – These days many who write checks do so to enjoy a short period between the presentation of the check and the deposit and actual draw from their checking accounts. But, that period of time is shrinking, and pretty much is just the time it takes the landlord to make their deposit plus maybe a day.

With more than 73 million millennial age residents, the time has come to consider accepting rent payments in other ways. Today’s millennials want to pay rent with a debit/credit card, and they want to do it with a mobile device. Perhaps it’s time to consider giving them the option.

Unless you’re technophobic, the usual resistance to accepting cards is the fee charged by the bank. Then you also have to set up a bank account card acceptance account, a hassle and with some setup fees in most cases. Some landlords have considered or are using PayPal, but they have some fees, particularly for automatic or recurring billing, that increase costs as well.

One alternative is Setting up an account at Stripe is free, and you tie it to your current business or rental property bank account. Stripe will process your tenants’ online payments, depositing the net after fees into your bank account; no trips to the bank to make a deposit or taking photos of checks. What are the fees? You are charged the same fee as PayPal, 2.9% of the amount + $0.30. However, Stripe offers a free subscription service to automatically bill your tenants. This costs extra at PayPal.

If the rent is $850/month, the fee for each transaction would be $24.95. That’s $299.40 each year, certainly a cost to consider carefully. One option considered and sometimes used as a “convenience fee” for using a card. In some states, it is illegal to have a “surcharge” for the use of a card, but a convenience fee may work if the convenience is the ability to pay online. This would be what you’re offering through Stripe, as they would receive an invoice and can pay it with a link online.

So, if you can add a convenience fee, that solves the problem; maybe. Other surveys show that consumers, particularly millennial age shoppers and renters, do not like to see that they’re being charged extra to use a card. What’s the solution? First, take a look at your rentals and make a guess at how many tenants you think may want to pay in this way. You could even do a survey. You may find that one-half or fewer would opt for the option. If half of them would pay this way, then that $299.40 averaged over all units would be $149.70 each. That’s a little over $12 per unit per month.

Why not just start offering the service and raise rents the next lease renewal to cover it? You have options as a landlord and business owner. Consider the convenience and good will of your tenants in your choices and how you’ll absorb or recoup credit card fees.

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