Think about the last time you paid a bill manually. That is, with a written check, mailed or hand-delivered directly to the recipient. Can’t recall? Perhaps because the old-fashioned way of doing business is far past “on its way out” and headed into the obsolete.

According to a recent study by TSYS of 1,000 Americans, 75% of individuals prefer to pay by card versus cash or check. What’s more, additional research by ACI Worldwide shows that Americans are paying 56% of all their bills online. And why wouldn’t they? With the speed, accuracy, and convenience of digital, it’s hard to see why anyone wouldn’t make the switch.

Unfortunately, despite the fact that consumers clearly prefer an online option, not all businesses are offering it. This goes especially for landlords. Many of them are fearful of making the jump to digital, believing all the half-baked myths and misinformation they’ve heard through the grapevine.

If this sounds familiar, don’t fret. Making a change like this one to your business can feel overwhelming, with so much to learn and so many options available. Below we break down the most common methods for online rent payment as well as the pros and cons to each avenue for rent collection. Read on to find out which option is right for you.

What Payment Methods to Collect

There is a multitude of ways to transfer money online. Here we go into detail on some of the most common methods of online payment.

ACH Payments

The ACH, or Automated Clearing House, is a network that facilitates the secure and automated transfer of funds between banking institutions and authorized parties throughout the United States. Transactions are batched together, sorted, and disseminated between numerous banks and accounts all at once, making it quick, efficient, and safe for all involved.

Likely you’re interacting with the ACH network on a regular basis, sometimes without even knowing it. Direct deposit and eCheck might be forms of ACH payment that you're familiar with. But it might be safe to assume that you have never been on the receiving end.

To begin receiving ACH payments tenants, they first must authorize the transaction by providing their name, bank, account and routing numbers, and finally the transfer amount. Their account with then be verified by the ACH before the transactions are cleared for takeoff.

PROS:

• Inexpensive – ACH payments are incredibly appealing to landlords because they are one of the least costly ways to collect from renters. Unlike credit cards or wire payments, they are not subject to assessment or interchange fees.
• Secure – The network is governed by NACHA, or the National Automated Clearing House Association, which ensures its high standards and regulations.
• Easily Automated – For longtime and consistent tenants, this feature is a great perk. Payments can be scheduled to run automatically on a daily, monthly, and even yearly basis. And for landlords, there’s nothing like helping to guarantee the timely payment of rent.

CONS:

• Limited Accessibility - For a landlord to submit his or her own ACH transactions directly to the bank, it can be difficult to navigate and demanding of their time.
• Bounce-ability – This is essentially referring to the idea that even a digital or “eCheck” can bounce. In this situation, if a tenant does not have enough money in their account at the scheduled time of payment, the transaction will not be processed. This can be a problem for landlords, particularly if the issue goes undetected.
• Long Transfer Times – Because the transactions are batched together in large groups, they money can take several days to appear in your account, making monthly planning more difficult.

Credit Cards

Providing the option of paying with a debit or credit card is appealing because their use is overwhelmingly common in our daily lives. Most individuals have at least one, if not more, card to their credit, making them extremely convenient.

In order to begin collecting credit card payments as a business owner, you must establish a merchant account with your bank. Merchant services securely processes the transactions on your behalf and then routes the money to your business account.

PROS:

• Appealing to Tenants – This could be a real win or even great back-up plan for tenants, as most of them will possess either a debit or credit card.
• Convenience – Tenants enjoy the ease and simplicity of using one form of payment for all their monetary needs.

• Quick Processing – Traditionally, card transactions take about 1-3 days to process, which makes them one of the quickest ways to pay.

CONS:

• Potential Chargebacks – When a person successfully disputes a charge with their credit card company, that money is recouped from the recipient, sometimes without warning.
• Considerable Fees – The numbers can add up fast when it comes to credit cards fees. From interest rates to monthly minimums, merchant service fees and more, it can amount to an expensive way of doing business.

Cryptocurrency

Cryptocurrency is true digital payment. It exists only online in virtual form as a means to provide a hyper-secure way to transfer funds. It uses cryptography to conceal the sensitive data associated with each transaction and, as such, maintains a high-level of protection against hackers and fraud.

If this seems like it might be out of your league, you can rest easy. Cryptocurrency is not yet a household tech, and it may be a while before the coin becomes mainstream. While there are landlords out there that do accept Bitcoin (the most popular cryptocurrency), you won’t be at a detriment if you don’t immediately rush to get on board. However, if you’re looking to learn more about this new way to pay, check out our article on the impact of cryptocurrency on the rental market.

PROS:

• Incredibly Inexpensive – This is one thing cryptocurrency is known for, with most transactions being absolutely free.
• Lightning Speed – Especially when compared to the ACH process, which can take several days. Popular cryptocurrency Bitcoin settles every 8 minutes.

• Shows Forward Thinking – This is something valued by tenants, demonstrating to them that you are committed to staying on top of trends and technology in the market.

CONS:

• Slow Conversion – For all the speed you get on the front end of a crypto transaction, you lose when you go to convert to USD or traditional monies.
• Not Trusted – The currency has not yet widely been adopted by the mainstream due to it’s general newness and immaturity.
• Lacking Demand – According to the experts at the American Apartment Owners Association the need to get in the crypto business is low, as the demand from tenants is just not there yet.

How to Collect Them

Now that we have thoroughly reviewed the options you and your tenants have for making payments online, let’s get into how these transactions actually happen. This is where the rubber meets the road. And you have a few solid options. Below, we’ll outline each, how to get started, and the pros and cons.

Direct with the Bank

Most people are unfamiliar with the additional tools and services their bank can provide, especially when it comes to managing your business. Your personal banking institution is already equipped to assist you in accepting credit card transactions and ACH payments.

The set up is relatively easy from the client, your, perspective. You can simply reach out to your banking representative and he or she will lead you through the process. This option is common among landlords accepting online payment for the first time as the infrastructure is not completely foreign to them. Unfortunately, there are some major disadvantages to this route.

PROS:

• Accurate and Automatic Recordkeeping – The high standards of your banking institution ensure the highest level of accuracy when it comes to keeping tabs on your account.
• Account Consolidation – Tacking on business services to your existing account allows you to keep all your financial information in one place. A one stop shop for all your money needs.
• Elevated Security – The bank itself if highly regulated and monitored by a governing body, meaning you can rest assured knowing that your information is protected to the highest degree.

CONS:

• Less Control – The a la carte capabilities and communications that are available on some of the other, more sophisticated platforms will not be available to you here. Making one-off changes or adjustments to payment amounts, due dates, or late notices will not be an option.
• High Cost – Set-up fees, monthly charges, possible hardware, and transaction fees start to add up very quickly.
• Unmanageable Records – While you can be sure the bank is keeping the most accurate record of your transactions, it will not be easy to read from a glance. The system is not built specifically for your purpose and won’t waste time aggregating or pulling out the most key information. It will be up to you to sort through the raw data you receive.

Online Bill Pay

Online bill pay is a tool many of your tenants may already be familiar with. It is a service provided by most banks that allows individuals to pay their bills online in a safe and secure fashion. The tool is connected directly to the person’s checking account and funds are electronically extracted. The biggest benefit is that it allows users to centralize their bills and payments all in one location.

Because the service is a common feature of most banks these days, it is super easy to set up. The tenant would simply visit their bank’s online bill pay site, determine where to send payment, set as either one-time of recurring, and enable reminders to notify when each bill is due.

PROS:

• Availability – Most, if not all, banks offer this feature free of charge to their customers, making it easy for your tenants to jump right in and get started.
• Paper Options – This feature is unique to online bill pay and gives landlords the option of receiving a physical paper check in lieu of a digital ACH payment.
• Fewer Late Payments – With user-friendly tools and automation, online bill pay can help cut down on the number of late payments you receive each month.

CONS:

• Training Required – If your tenants aren’t already familiar with the feature, the responsibility will fall on you to teach them how to set up and use.
• Set and Forget – While the automation feature can be helpful, it also can create problems down the road if users aren’t frequently monitoring their accounts. Issues like an overdraft gone unnoticed can severely disrupt your flow of business.
• Lack of Control – Because you are still essentially dealing with the bank, you can run into the same control issues listed above.

P2P Platforms

Peer to peer payments facilitate the transfer of funds between two parties using their individual bank accounts or credit cards through an online or mobile app. You may be familiar with Venmo and Paypal as some of the most popular P2P platforms. What makes these apps so great is awesome usability. They were created to make sending money quick and painless.

They have become so common and mainstream in our daily lives that many landlords have seen them as an opportunity to streamline their own businesses.

PROS:

• In Vogue – This type of payment is of the moment, with most tenants already having a P2P app installed on their phones. This shows potential renters that you are up to date and informed on business trends.
• Convenience – With a well-established and expertly designed user interface, the landlord to tenant instruction would be minimal and set up for users a breeze.

CONS:

• Less Control – Just as with banks, working with P2P platforms minimizes the amount of control landlords have over making changes to the process.
• Legal Issues – In order to avoid the fees that come with using a business account, some landlords have taken to utilizing their personal account on the platform. However, this is not advised, as it is in direct violation with the policy statements of each platform.
• High Cost – The fees rack up quickly here, with money being taken out at every step of the process. From transaction fees to a merchant bank cut, your bottom line is significantly affected.

Property Management Software

The best part about property management software is that it’s created for just that – property management. Where other options must be tweaked and worked around, property management software is designed specifically for your purposes. And it shows.

Rather than doing everything a la carte (e.g. communications via text, leasing through email, rent payment elsewhere), the tool allows property managers to centralize all management tasks in one place. And once they are there, they can be simplified and automated, tracked and analyzed all in the name of optimization.

In terms of set up, you simply determine how to customize the platform to fit your business needs and then invite your tenants to join. Payments are processed by the platform and distributed to you via ACH payment.

PROS:

• Designed for You – As the name implies, the software is made for the purpose of property management, meaning time and attention has been taken to provide you, as a landlord, with all the tools you need in your business.

• Advanced Support – This is something you want to pay close attention to when searching for the best fit. Personalized support is a key feature that can be found in many platforms.
• Fast Transactions – Some platforms (Innago being one of them) offer express funds delivery. For example, Innago delivers funds into your account after just one business day.
• Detailed Reporting – Collection reports are a key feature to the platforms, allowing landlords to filter and manipulate the data to easily understand the details at a glance and quickly find whatever information they need.
• Profitable – Because transactions are processed on the platform itself, there are no additional fees.

CONS:

• Research Required – In order to find the right fit before taking the plunge, it’s important to do your own research and learn what option is best for you.
• Costly to Your Business – If you do end up going with a platform whose services do not live up to your expectations, the waste of time and resources could be incredibly costly to your business.

Finding the Right Fit

For most Americans, manual billing is a thing of the past, and soon it will be for you too! You’ve just learned not only what payment methods you can accept online, but also how exactly to accept them. The next step is up to you. Do your research, weigh the pros and cons, and decide which method is the best fit for your business. Hop on the digital rent collection train. Your bigger pockets will be glad you did.