Different Ways That Tenants Pay Rent

Which Forms of Payment You Should Accept as a Landlord

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Different Ways to Pay Rent. PeopleImages.com/DigitalVision/Getty Images

The way in which a tenant pays their rent may be more important than you think. Some forms of payment are very difficult to document and can create issues if you have to go to court with a tenant over nonpayment. Here are eight common forms of payment, including the types you should never accept and the types you always should.

3 Ways of Paying Rent Not to Accept

  • Cash- You should never accept a rental payment from a tenant in the form of cash. The tenant can claim they put a certain amount of money in the envelope and you may arrive at a different number when you actually count the money. This is especially dangerous if you allow a tenant to leave an envelope of money for you. If the full rental amount is not in the envelope, it will be a he said vs. she said dispute with no way to prove how much cash was actually in the envelope.

    Do not accept cash payments for rent. They are impossible to keep track of and there is no record of the amount you actually received.
     
  • Credit Cards- Do not allow your tenants to pay rent using a credit card. First, you will usually have to pay some sort of a transaction fee. Secondly, the tenant always has the opportunity to report this charge to their credit card company as fraudulent, leaving you with no payment until the situation is rectified, hopefully in your favor.
     
  • Direct Deposit Into Your Banking Account- Do not allow tenants to directly deposit their monthly rent into your banking account because this involves you having to give them your account number and your routing number. If they are able to put money into the account using this information, they are also able to take money out of the account using this information. While most people are honest and would not commit this type of crime, it is not worth the risk. Especially since there are other, more secure, methods of collecting rent.

1 Form of Rental Payment to Accept Sometimes

  • Personal Check- Although I would not recommend accepting personal checks from your tenants, many landlords still do. With personal checks, there is no way to verify if the check is real or if the funds are available until you try to deposit the check and it does not actually clear. Once your tenant has established a payment history using a more secure method, you may decide to accept personal checks since they have built up the trust level.

    4 Ways of Paying Rent to Accept

    • Certified Check- The bank will certify a check stating that the tenant’s bank account has the necessary funds available at the time the check is written. However, there is no guarantee that those funds will still be in the account when you go to actually deposit the check. Therefore, this form of payment is more secure than a personal check, but not as secure as a cashier’s check.
       
    • Cashier’s Check- A cashier’s check is very similar to a money order. However, there is a larger fee associated with a cashier’s check and they are only issued by a bank where you actually have a bank account. The bank will withdraw the funds from the tenant’s bank account and will then serve as guarantor of the amount that the cashier’s check is for. Since the bank is guaranteeing this amount, you do not have to worry about a tenant withdrawing funds from their personal account before you try to cash the check.
       
    • Money Order- You can usually get a money order at a bank, local post office or other convenience store. It is like receiving a gift card of rent. The tenant had to transfer funds in order to get the money order. For example: the tenant wants a money order for $1000, so they give the post office $1000 in cash. The post office then gives the tenant the money order for $1000, which they give to you. There is usually a small fee associated with money orders.
       
    • Online- Online payments that do not require you to provide any of your personal banking information to a tenant are a good option. It is quick, the funds usually transfer immediately or within a day or two, and it requires little effort, you can sit on your home computer and watch your bank account grow. There are many online rental payment sites such as ERentPayment, RentMatic and RentMerchant.