While many tenants enjoy the convenience of credit card payments, many landlords and property managers are wary of accepting them due to concerns over cost. Below are three ways you can make credit card acceptance easier for your business, helping you create better tenant experiences, manage your fees, and get paid faster.
Each week, I speak to several accounting, collections and lease administration professionals in the property management and commercial real estate space. In all of those conversations, there is one question that I will always be sure to ask: Do you accept credit card?
The answer usually falls on the spectrum of a ‘yes, but…’ to a resounding ‘no’.
Many landlords and property managers are wary of accepting credit card for one primary reason: It’s too expensive.
Why pay transaction fees on credit cards when tenants pay via check or ACH? Both, in theory, low-cost methods to accept payment. I urge you to think differently.
How much does it really cost you to process a check? Lockbox fees, bounced checks, chasing short payments, “checks in the mail” delays and labor-intensive cash application are just the start. Many tenants want to pay with credit cards and by not accepting them, you may be providing a poor tenant experience. I’d hate to think what “Sorry, we don’t take credit card” will cost you in the long run.
So how do you reconcile the desire to be cost-effective with the need to provide tenants with a great payment experience? Think strategically.
Stop thinking about credit card acceptance as a line item cost and view it as the strategic weapon it is. By tailoring credit card acceptance rules across your organization, you can steer behavior and affect key payment metrics, including speed of payment.
Below are three ways you may consider accepting credit card to create a better tenant experience while helping you manage fees and getting paid faster.
Limit the transaction size and timing
Make an “offer” to accept credit card if the tenant pays you within 5 days and the transaction is $5,000 or less, for example. This promotes early payment and gives you control over the fees.
Accept credit card only if the tenant goes on “AutoPay”
Some tenant relationships are less sticky than others; a short-term kiosk, for example. Allow those tenants to pay with credit card only if they go on “AutoPay”. This removes friction and limits many of the payment risks associated with short-term tenants. You get paid on time and save the effort previously required to chase down tenants who are high touch on collection but represent low revenue.
Pass on the fees
Pass the fees on to the tenant by charging a convenience fee. With this option you eliminate your incremental cost while still providing the functionality to those tenants who really want it. Although charging the tenant more money may seem counterintuitive to providing a better tenant experience, you would be surprised at how many tenants bite. As most credit cards come with points or cash-back offers, this option allows you to get paid faster while your tenants earn a trip to Hawaii – win/win.
Smart CRE companies are using credit card acceptance as a tool to enhance the tenant payment experience and improve ADP (average days to payment). By enabling a secure PCI-compliant tenant portal and adding sophistication around credit card acceptance, you can gain control over costs and provide tenants the experience they deserve.