Landlords, Don't Believe These 5 Myths About Online Rent Collection Uncover five myths of online rent collection holding back landlords from making the switch to digital payments.
Opinions expressed by Entrepreneur contributors are their own.
When customers are online, so are businesses. It's no less true in the rental industry — with customers increasingly embracing online bill pay, online rent collection is only a logical next step for landlords.
But online rent collection is often met with hesitancy. Some believe that online payments are less secure or reliable. Others fear the complexity of online rent collection for themselves and their tenants.
However, most of these concerns are proven myths. The truth is that online rent payments are one of the safest, most efficient and overall best methods for rent collection. This article will discuss and refute five myths about online rent collection to ease your concerns about switching to this vastly superior method.
1. Online rent collection isn't secure
You or your tenants may have concerns about the security of online payments. Surrendering your credit card number or account and routing numbers to an online platform without knowing who's behind it may make it seem like anyone can steal your information. However, transaction fraud is very rare in actuality. This is because rent payment platforms are usually encrypted so that hackers can't access the sensitive information you enter.
There are a few steps you can take to decrease the risk of fraud further. When you switch to online payments, encourage your tenants to:
Always use a secure internet connection: Advise tenants to avoid using public WiFi when paying rent or to use a VPN (virtual private network) if they must make a payment while out and about.
Use a credit card instead of a debit card: Credit cards are generally more secure than debit cards, which deal with real funds from your tenants' accounts. It's much easier to recover lost funds with a credit card by disputing a fraudulent payment.
Keep track of all accounts: Even if your tenants use automatic payments, remind them to regularly check their cards and accounts to ensure that the right amounts are being taken at the right times. Any suspicious transactions should be reported immediately.
2. Tenants won't know how to use it
Many landlords also worry that their tenants (especially older ones) won't know how to use online rent collection and won't bother learning. Many older renters are accustomed to writing paper checks, and the stress of learning a new platform or site might be too much to ask.
Despite these qualms, you may be surprised to learn that online bill pay is more common than you think. Fifty-six percent of all bills were paid online in 2017, and this percentage is only increasing. Even older generations are likely to have at least purchased a plane ticket or paid off their credit card bill online.
For those who do choose to pay rent online, the interface is usually quite intuitive and simple to learn. Even the least tech-savvy individuals will easily get the hang of paying rent online from a secure platform each month.
3. Online payment platforms are too complex to learn
On your end, you may worry that an online rent collection platform you choose won't be easy to get the hang of. Getting a platform set up can feel overwhelming, especially since there are so many options, including online bill pay through your bank, peer-to-peer (P2P) platforms and property management software.
However, by carefully researching these different options ahead of time, you can determine which platform will be the easiest and most straightforward for your rentals. Platforms that offer rent pay online are designed to have smooth interfaces, navigable menus and automation capabilities. Yes, you might have to invest a morning or afternoon exploring the platform or scheduling a walk-through with a customer service rep if you use property management software, but the payoff to this small investment is that rent collection can be largely hands-off from then onward.
4. Online rent collection will deter renters who would rather pay via cash or check
Some landlords fear that collecting rent online will play into the overall decline in cash and check payments and deter tenants who would rather pay the traditional way.
While it's true that online payments have become more popular over the last few years, there are still uses and purposes for paper payments. There's no reason to eliminate paper options altogether. Instead, you can simply offer online rent payments as an option (and even encourage tenants to use it), but you can still allow offline methods of payment for those tenants who want them. In fact, it may even be against your state's laws to require that tenants make payments electronically.
If you do have tenants making payments in multiple ways, keep in mind that you'll need to keep careful records of offline payments by entering them into your software and sending receipts manually.
5. Online payments increase the risk of bounced eChecks or credit card chargebacks
eChecks, also known as ACH payments, are just what they sound like — electronic checks that work by transferring money directly from your tenant's bank account to yours. And just like paper checks, eChecks have a risk of bouncing. It's possible that a tenant won't have the funds in their account to fulfill an eCheck payment they submitted. It's also possible that credit card chargebacks will occur if a tenant sees a payment on their statement that they don't recognize.
While both bounced eChecks and credit card chargebacks are possible with online rent payments, they are no more likely than with traditional checks and credit payments. There are also ways you can prevent both of these risks from occurring, including reminding your tenants to regularly check their accounts if using automatic payments and to write down the payment processor name they should expect to see on their credit card statements.
If a tenant does end up making a claim for the rent payment on their account statement, the good news is you can usually easily dispute the claim with a little evidence. All you need is the original lease agreement stating the rental amount and due dates or an invoice showing that the charge was valid.
It can be overwhelming to consider upending your rental business's traditional payment model and switching to online methods instead. However, given the array of benefits online rent collection can offer you and your tenants, you shouldn't hesitate to make the switch.