While other payment apps are available in the market for transferring money between friends and family or to complete e-commerce transactions for products or services, in the real estate world, three different payment methods are typically most commonly accepted: Debit, Credit, and ACH. These payment methods are integrated into various property management software platforms, including TenantCloud.
These three payment methods offer speed, convenience, and security for large transactions such as rent payments, but some are better than others.
When it comes to paying rent, choosing between debit/credit card payments and traditional Automated Clearing House (ACH) payments can significantly affect your cash flow, convenience, security, and benefits.
Let's break down the benefits and drawbacks of each.
Debit Card Payments
A debit card payment is a form of cashless payment that directly accesses the funds available in the cardholder's checking or savings account. It's a convenient, widely accepted method of payment that allows individuals to make purchases in-person at retail locations, online, or over the phone.
Debit Positives:
- Rewards and Cashback: Many debit cards offer rewards, points, or cashback on transactions, which can be a pleasant perk for a significant monthly expense like rent if your card allows you to earn benefits for it.
- Faster Payment Clearance: Debit card transactions typically process much faster than ACH payments. On TenantCloud, they process immediately, just like when you swipe your card in the store, which can be beneficial if you need to make a last-minute payment.
- Dispute Resolution: Banks and credit unions often provide robust dispute resolution services and fraud protection, making it easier to contest unauthorized transactions.
- Building Credit: Regularly paying your rent on time with a debit card might help build your credit score (assuming you have enabled the TenantCloud rent reporting feature).
- No Interest Charges: Since you're using your own money, you won't incur interest charges as you might with credit cards.
- Budgeting: Debit card payments can help with budgeting since you're limited to spending existing funds in your account, and they typically come out of your account immediately once you authorize the transaction.
- Widely Accepted: Nearly all landlords and property management companies accept debit card payments as a standard, reliable form of payment. If yours doesn't, reach out to them to request that they make debit and credit transactions available to you.
Related: Boosting Credit Scores: The Importance of Rent Reporting for Tenants
Debit Drawbacks:
The only real drawback to using a debit card to pay rent is the transaction fees. However, at the end of the day, cashback, rewards, and other benefits may offset that cost, giving you the added benefits of speed, security, and convenience for an insignificant cost, or maybe no cost at all.
Get Rewards? Earn More - Pay Rent With Debit*
Credit Card Payments
A credit card payment is a type of financial transaction where you borrow funds up to a certain limit from a credit card issuer to purchase goods or services now and agree to repay the borrowed amount later. Unlike debit cards, which withdraw money directly from a checking or savings account, credit cards allow you to borrow money up to a pre-approved credit limit.
Credit Positives:
- Rewards and Cashback: Many credit cards offer rewards, points, or cashback on transactions, which can be a pleasant perk for a significant monthly expense like rent if your card allows you to earn benefits for it.
- Faster Payment Clearance: Credit card transactions process much faster than ACH payments. On TenantCloud, they process immediately, just like when you swipe your credit card in the store.
- Dispute Resolution: Credit card companies often provide robust dispute resolution services and fraud protection, making it easier to contest unauthorized transactions or to replace your card in the event that it's been compromised. Some even offer overnight card replacement.
- Building Credit: Regularly paying your rent with a credit card and settling the bill on time might help build your credit score by just doing what you do every month. If you're paying rent, you should get credit for it.
- Widely Accepted: Nearly all landlords and property management companies accept credit card payments as a standard, reliable form of payment. If yours doesn't and they use TenantCloud to manage their rentals, reach out to them to request that they make debit and credit transactions available to you. Once they activate it on their account, you'll have the ability to pay rent using your credit card.
Credit Drawbacks:
- Interest Charges: If you don't pay off your credit card balance each month, you might incur high interest charges on the carried balance. Using a debit card may offer similar rewards without the risk of interest.
- Transaction Fees: There is usually a fee for credit card transactions, which can add up over time. However, cashback, rewards, and other benefits may still offset or negate that cost, giving you the added benefits of speed, security, and convenience at an insignificant price.
ACH Payments
An Automated Clearing House (ACH) payment is a form of electronic funds transfer (EFT) that moves money between banks and credit unions in the United States. It's a system that has been used since 1972 and has not been significantly updated for the modern world in quite some time.
Positives:
- Lower Fees: ACH payments feature lower transaction fees compared to debit and credit card processing fees.
- Widely Accepted: Most landlords and property management companies accept ACH as a standard, reliable form of payment.
Drawbacks:
- Slower Transaction Times: ACH payments can take several days to process, which requires planning to ensure payments are made on time and can significantly impact cash management in your account.
- No Rewards: ACH payments don't offer cashback or rewards like credit and debit cards typically do. You just pay rent and get no added benefits beyond the space you pay to live in.
- Complicated to Change or Stop: If your bank account is compromised, changing or stopping ACH payments can be more burdensome than simply getting a new card. It might require a visit to the bank or a call to customer service and setting up new ACH instructions with your landlord. Getting payments returned is equally as difficult and slow as it was to make a payment to begin with.
- Failed Payments & Fees: If there's not enough money in your account, an ACH payment can fail, leading to possible late fees and bank overdraft charges. An NSF (Non-Sufficient Funds) can also happen if an ACH payment fails. This is common, and the NSF fees add up over time.
Conclusion: Debit and Credit vs ACH Rent Payments
The choice between using debit/credit cards and ACH payments for rent hinges on your personal circ*mstances, including your cash flow, how you handle credit, and what kind of rewards or convenience matters most to you.
Credit and debit cards generally offer more in terms of rewards and security but also typically result in processing fees. However, those fees may be offset or even negated through benefits and rewards when you use your card.
ACH is typically cheaper, but that is about the only benefit. ACH lacks the perks of card payments and is significantly slower and more cumbersome to manage if - when - issues arise.
As a savvy renter, you can weigh these factors against your financial habits and preferences to make the best decision for your situation. It's also important to review the specific terms offered by your landlord or property management system, as they can vary widely and might tip the balance in favor of one method over the other.
On TenantCloud, we believe that tenants are better served with speed and convenience by paying rent via debit, especially when eligible reward and cashback programs are involved.
How can I pay rent with a credit/debit card?
How can I enable/disable rent reporting?
Note: *Not all debit or credit card rewards programs will allow rewards for rent payments. Check with your financial institution if you are unsure about the details of your rewards program.
