Today’s era is an era of innovative ways to transfer anything. Online businesses need mobile wallets for transfer of amounts. There are easy to use apps such as PayPal and Venmo which use digital wallets for convenient money transfer.
Question is, can they be used for paying rent? After all they do help in reducing cash and check payments for rent. Nevertheless, some convincing causes do exist for avoiding Venmo and PayPal. Let’s go through these reasons one by one.
Using Venmo for Rent Collection
Venmo is an app used to make online transfers. The transfer can be done instantly using a bank account, debit card, or credit card. But, Venmo can’t be considered the best choice for rent collection, because it is unprotected and doesn’t come with necessary standard features. Following are the pros and cons of rent payment through Venmo.
Pros of rent payment through Venmo
Ease of use: You can begin transfer of money as soon as you download the app.
Free money transfer: The money transfer using Venmo is free.
Rent split: Renters can split rent among themselves using Venmo.
Credit and debit card payments: You can use credit and debit cards without getting annual fee charges. It may add 3% to the rent.
Social media options: There are common social media options available in Venmo to enhance the user experience, and aid communication.
The cons of rent payments through Venmo
Venmo is not a perfect option for payment transfer. Here are some disadvantages of Venmo that make it a less feasible option.
Fees for transactions and “cash a check” options:
Rent payments are considered business transactions and Venmo charges additional 1.9% fees plus $0.10 for business transactions. It also charges 1% and minimum $5 for using the “Cash a Check” option.
Fees for prompt payments: Venmo charges 1.5% fee (minimum $0.25 and maximum $15) for prompt transfers.
Recurring payments: Venmo doesn’t have the feature to set up recurring rental payments which may cause late rent payments.
Canceling a payment on Venmo: There is no refund option if the renter paid the wrong amount. It is not possible to cancel a payment on Venmo.
Late fee: Venmo doesn’t allow you to automatically charge any late fees.
Disagreement guidelines: Usually, Venmo doesn’t get into payment disagreements. Nevertheless, they will favor the renter more when they do get involved.
Partial payment: You can’t stop or decline a partial payment that was paid using Venmo. This means that you might not be able to evict a bad tenant if he made a partial payment.
Reporting to credit bureau: There is no option to report rent payments to credit bureaus in Venmo. As a result, the tenant’s credit score might get affected.
It is quite evident that there are more cons of using Venmo as compared to the pros. Undoubtedly; Venmo is quite good for money transfers to friends and family or splitting rent. Nevertheless, using it for rent collection may not be as useful.
Let’s explore PayPal as an alternative for rent payments.
Using PayPal for rent collection
Similar to Venmo, PayPal is usually good for making prompt payments. Question is, is it right for rent collection?
The pros collecting rent through PayPal
Ease of use: PayPal is user friendly and secure.
Multiple methods for payment: PayPal allows rent payment through credit card, bank account, PayPal balance, or debit card.
Business accounts: With a PayPal business account, you can keep track of your statements. There are payment protection plans available. But real estate transactions are not protected.
Transaction limits: You can send up to $60,000 in a single transaction, but sometimes there can be limits up to $10,000. The payment doesn’t go to your bank but your PayPal account.
The cons collecting rent through PayPal
Options for landlords: Landlords can’t automatically get late fees or block payments. Hence, evicting a bad tenant gets difficult.
Fees for rent payments: Peer to peer transfers are free using PayPal, but there is a fee for business transactions. This ranges from 1.9% to 3.5%, with a fixed rate of up to $0.49. However, real estate transactions are not protected.
Prompt transfer fees: For prompt transfers, PayPal charges 1% fees.
Protection for property owners: Similar to Venmo, PayPal also favors the payer in case of a dispute. So, for property owners there is almost no protection.
Reporting payments to credit bureau: In PayPal, there is no option for reporting rent payments to credit bureaus. This won’t help in motivating tenants for on time payment.
Reminders for rent: There is no option to send rent reminders in PayPal before the due date. However, it does send out reminders when payments are overdue.
Generally, apps like Venmo and PayPal do not favor you as a property owner. So, are there any alternatives? Property management apps might be a better substitute.
Why use property management apps?
Generally speaking, property management apps are an excellent option for the collection of rent. Following are a few benefits of these apps:
Rental management: These apps enable you to collect and track late rents, security deposits, prorate rent, or utility fees. They also send automatic reminders to renters.
Effectiveness: These apps have tools that include options like applications, rent collection, and leasing. Some of these apps assist you in maintenance requests.
Recordkeeping: These apps also keep track of rent payments, allowing landlords and renters to have visibility on these payments. A few apps enable property owners to enter their expenses and revenues in accounting software.
Flexible payments: These apps also allow you to decline or stop payments, split rent among renters, fix recurring payments, prorate rent fees, and charge late rent fees.
Charges for collecting rent: Almost all of these apps don’t have rent collection fees. The ones that do are lower than PayPal and Venmo.
Reporting to credit bureau: A few of these apps enable you to report the collections to credit bureaus.
Conclusions
There are many pros of using property management apps. This makes collecting rent through PayPal or Venmo a less suitable option for property owners. As explained above, Venmo or PayPal do not favor you as a property owner in case of disputes. So, you should use the apps that are made for rental business. The property management apps simplify rent collection and make it instant, secure.