Picture this. It’s the first of the month. You wake up refreshed (no sleep lost here), have yourself a cup of coffee, crack open your laptop for the first time of the day, and head on over to your management site only to find that all rent payments due to you for this month have already been made and are en route to your account. Sounds like a dream, right?

But for many landlords today, this is a reality. Online rental payment has made it easier than ever to collect funds from tenants. Gone are the days of chasing down paper checks and waiting on snail mail. And while there are many options available for processing online payment, they all come with their own unique set of features and services.

Here we will discuss managing online rental payments through your personal bank, as that is just one way to make the jump to digital. And while it might seem like the most attractive option, as you are working with a familiar institution, there are plenty of differentiating factors to consider when making this decision.

Methods for Rent Collection Via Bank

ACH

ACH stands for Automated Clearing House. It’s likely that even if you aren’t already aware of the ACH network, you’ve interacted with it numerous times. It’s a system that automatically processes financial transactions. Money is transferred through authorized channels and transactions are batched and redistributed at the end of each business day. Payments can be set as one-time or recurring, making it easy for the process to be even further automated. In this scenario, the receiving financial depository institution, or RFDI, cannot be you as an individual. This is where you bank comes in. Typically, ACH payments cost less per transaction, making them a fast and safe alternative to the use of credit cards.

Credit Card

For tenants, credit card payments are incredibly attractive because it requires no additional work on their part. There’s no form filling or account set-up. They simply enter their info, as they do for any other purchase online, and away they go.

However, in order for landlords to accept credit card payments, there’s a bit more involved. In order to begin accepting payment via card, you will need to establish a merchant account with your bank. This is unique from a standard business account, as the merchant services allow you to accept payment directly into your account versus simply managing the funds that are already there.

Online Bill Pay

Online bill pay is a service that is provided by most banks to their customers free of charge. Essentially anyone with a checking account can visit their banking website and activate the digital payment of virtually any bill, from a utility payment to their Netflix subscription. The feature allows them to manage all of their outgoing expenses from one central location.

Once the individual prompts the recurring payment, his or her bank takes over in ensuring those funds make it to their intended destination. The bank will either make a direct transfer of the desired amount from one account to another or send a physical check to the receiving party.

In terms of set up, the responsibility would fall on the landlord to educate tenants on the process and encourage them to enroll with their bank. Again, this is a free service available with all major banking institutions and likely one that folks are familiar with.

The Positives

Everything’s in one place. In almost anything you do, it’s nice to keep it simple. And that’s exactly the convenience this option allows. You won’t be shuffling to find your 87th login and password combination and won’t have to monitor numerous account activities.

Additionally, the bank likely has a whole menu of services that you could benefit from. When it comes time to make changes or expand your business it’s good to have options and alternatives at your disposal.

You can trust that you’re protected. Managing your money and transactions through the bank gives you invaluable peace of mind, knowing that the security standards and practices they are held to are top notch. The level of protection larger financial institutions can provide in terms of technology, intel, and fraud prevention are unmatched.

They’ll do the record-keeping. This is an instant perk of doing business with your bank. For every transaction, you can be certain that there is an accurate record of all dollars and cents moved through your account. If you’re thinking that getting rid of the burden of bookkeeping might seem too good to be true, read on to the Negatives to see why you might be right.

You legitimize your business. Working with an esteemed financial institution can essentially give you instant credibility. These days, any Tom, Dick, or Harry can collect money online, but that doesn’t necessarily make it safe, especially in the eyes of the customer or renter. Having the backing of a certified bank can give your tenants peace of mind knowing there is a legitimate entity involved in the process.

It’s convenient for your tenants. Providing an online rent collection option is the ultimate pro for potential renters. So much so that it is quickly becoming standard in the property management community. And working with your bank to ensure this option makes it even easier.

The Negatives

It can get pricey. Setting up a merchant service account itself will not set you too far back in terms of cost. The associate fees, hardware expenses, monthly charges, and cost per transaction however, are a different story. Banks know that their reputation alone is worth the markup, and use that to their advantage.

You’ll have to pay as you play. While the setup costs and standard fees alone aren’t inexpensive, you’ll also have to consider what you’ll be spending in “per transaction” costs. Every pricing model is different, so it’s important to have a good understanding of what additional fees might be lurking around the corner of your increased revenue.

The records can be overwhelming. One of the upsides of processing with your bank is the guarantee of detailed and accurate information. However, the bank is not necessarily concerned with or equipped for helping you understand or synthesize that data. In other words, if you are managing a long roster of properties it can become overwhelming to sift through the raw data, however accurate it may be, provided to you by the bank.

It doesn’t get you. An easy way to think of the service the bank is providing you is to think of a mailbox. Payment information comes in and the bank holds it until you come to collect. The bank has no understanding of what the information means to you and how your business operates. It’s simply there to catch and release.

Other alternatives, like property management software, are designed with features specific to your business, that allow you to get things like late fees and reminder notifications done quicker and easier.

You won’t have full control. On the landlord side, this can be an issue for many reasons. One of the biggest problems that could arise from the lack of control has to do with eviction. For some payment methods, with an authorized connection, recurring payments can be made. If landlords don’t have the ability to reject partial payments, this could have serious legal ramifications.

You could still be vulnerable. The sad truth is that fraud comes in many forms. And while the security provided by the bank is some of the best out there, there’s still going to be potential for foul play. From credit card chargebacks to theft of financial information, landlords must still remain vigilant even with the protection of the bank.

The Homework

Online rental payment is quickly becoming a standard feature in the world of renting, and there are plenty of options out there for landlords looking to make the switch. Today we discussed in detail the pros and cons of setting up online payment through your banking institution, but when it comes to researching the processing alternatives, you’re just getting started.

Going through your bank is just one way to begin collecting rental payment online, and, especially in the world of real estate, not always the best way. It’s important to do your due diligence and consider all the facts. Once you have an understanding of all the players, you can intentionally pick your team. But don’t delay, your tenants are counting on you!