Credit Scores and Reports

More landlords accepting rent payments by credit card

While everything from Chevrolets to stamps can be put on plastic, there’s one place people can still get rebuffed: the landlord’s office.

For many people, the only time each month they even dust off their checkbooks is when the rent is due. But while acceptance is hardly universal, a growing number of landlords allow paying rent by credit card.

Financial experts hasten to add that charging rent and related expenses isn’t for everybody — there’s the risk of overextending oneself for a vital expense.

Rent on credit cards becoming more commonBarriers falling to charging rent
But it’s clearly a trend, especially as the apartment management industry consolidates and card processing firms cut their charges to attract the business. Apartment management remains a highly regional business, and smaller landlords run many of the nation’s units, and they have less incentive to take on the fees and structure involved with accepting credit cards.

Larger firms, however, more readily contract with payment processors and offer a centralized Web portal for residents to make electronic payments — whether by electronic check or credit card — essentially offering a simple solution for their local managers.

“As an industry, it’s related to the fact that property management software platforms are coming to an evolution where accepting credit cards is more feasible,” says Christopher Finetto, vice president of vendor services at Riverstone Residential, the nation’s third-largest property management company.

A significant number of the properties at the nation’s top five apartment renters accept credit cards, generally through a set of partners that have evolved to serve the industry, including RealPage, PropertyBridge, RentPayment and NWP. Overall, millions of units can pay rent on credit cards.

Denver’s AIMCO — the nation’s largest apartment community manager with more than 195,000 units — has accepted credit cards through a partnership with PropertyBridge for more than two years.

No. 2 Pinnacle Realty, based in Seattle and managing more than 165,000 units, contracts with apartment-management software vendor RealPage to accept credit cards.

At the 47 communities where Riverstone accepts electronic payments, tenants can pay with MasterCard, Visa or Discover cards at 18 of them.

American Expressbegan offering some high-end tenants a chance to charge their rents more than four years ago and has since expanded its acceptance into dozens of cities. Many tenants have been able to charge rent for some time, even if they weren’t aware of the fact.

Are you a good candidate for paying rent with a credit card?

•  You pay your cards off in full every month.

•  You have reward cards where the benefit from large payments helps offset any convenience fees from landlords.

•  You’ve paid late fees in the past when having to manage a paper check each month.

•  You have a high enough credit limit that a rent payment doesn’t put you close to it (otherwise, your credit score could be hurt by the high-use percentage).

•  You have the rent money available in your checking account (otherwise, you could worsen an already bad financial situation).

Picking up the tab
Even so, tenants overall are still more likely to pay with electronic check rather than charging rent on a credit card.

Understandably, while paying on credit card is on the rise, a key factor is who pays the transaction costs. For landlords who offer credit card payments for free as a competitive advantage, there’s far more widespread usage.

Where the processing cost (often around 2 percent of the transaction) is passed along to tenants in the form of a $15-$30 monthly “convenience” fee, savvy renters tend to calculate that against their potential rewards — and then stick with online bank drafts or even old-fashioned checks in higher numbers.

Still, considering that many apartments charge a 10 percent late fee that can run to $60 or $100 or more, many renters are willing to pay the convenience fee just to know the payment is safely made on time. And as more tenants come to expect to put all of their living expenses on credit, more landlords are offering the convenience cheaply or free.

“Imagine going to a gas station and it doesn’t have a card swipe,” says Riverstone’s Finetto. “It’s an expected convenience and that’s where it’s headed.”

The overall cost of processing card charges for rent continues a downward trend. MasterCard recently lowered the fees it charges for processing rent and rent-related payments to just over 1 percent, in a move to capture a bigger percentage of housing payments.

There are clear advantages to be had on both sides of the transaction. Landlords avoid the costs of having to chase down and process rent checks, while renters can gain convenience, generous reward points and often a few weeks of “float” to pay their rent.

“We’re fiscally responsible, and if we didn’t have the money we wouldn’t do it,” says Mary Pelland, who rented via credit card in Spokane, Wash. “It’s really to get the convenience, and a lot of airline miles.

“I don’t like writing checks. We do most everything on credit card just to have it together.”

Don’t dig a housing hole
As with any large purchase, though, there are significant dangers for the undisciplined card user. There’s near-universal agreement that running a credit card balance (“revolving,” or paying only a balance portion or the minimum payment each month) based on your rent payments is a huge red flag.

Even for well-disciplined spenders who aren’t straining their resources, charging such large amounts can hurt hard-won credit scores if it puts tenants consistently in the upper half of their credit limits.

And with the U.S. economy in the midst of a crunch in both the housing and overall credit markets, those concerns are multiplied.

 “I think the round-table conversation property managers have is about the morality of accepting a credit card for rent,” says Finetto. “There are people who believe we’ve already extended them credit in lease form — are they being further encumbered by extending themselves?”

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