August 20, 2015
Online Convenience Fees – Friend or Foe?
Property managers are on the same page when it comes to collecting rent. They want payment methods that are convenient and flexible for renters, while minimizing processing time and costs.
In today’s modern world, where most residents carry smartphones everywhere and favour the quickest payment methods possible, the answer is simple: move away from cheques, and embrace online payments.
But many online payment options, such as credit or debit cards, come with hefty bank processing fees. To offset those costs, many property managers charge convenience fees.
Do Convenience Fees Live Up to Their Name?
According to Merchant Council, convenience fees are “a charge in addition to the original transaction amount for the convenience of being able to use an alternate payment method.”
It seems simple enough. But be careful; convenience fees aren’t the same thing as a surcharge – at least not according to VISA – and surcharging customers for paying with a credit card can be considered discriminatory. A convenience fee can only be applied to payment methods that fall outside your standard payment options.
When looking to find the perfect balance between customer convenience and cost-efficiency, property management companies adopt several payment models:
- Free e-transfers. Many property managers prefer to offer renters the option to pay rent online for free with their chequing or savings accounts, and not to accept credit or debit cards. Residents gain a no-cost online payment option, and property managers can eliminate credit card interchange fees. However, this doesn’t meet all renters’ requirements; many prefer to have the option to pay via credit card.
- Free e-transfers and credit card payments. Some property managers opt to offer e-transfers and credit/debit card payments at no cost to renters. This offers maximum convenience and choice to residents, but keeps property managers on the hook for card interchange rates.
- Free recurring payments. To strike a better balance between selection and cost reduction, property managers offer no-charge payments for recurring credit/debit card transactions, but may charge a convenience fee for one-time credit card payments. This encourages renters to make a habit of paying online, and helps property managers recoup some of their losses for residents who go back and forth between online and paper payments.
Taking a Toll
There are many ways to handle the issue of convenience fees. The question is, do those fees really pay off? Yes, they help offset credit/debit card charges, but at what cost?
Customers resent convenience fees. Even when faced with only a small charge for paying online – say, $2-$5 – many renters will choose to pay by cheque.
But cheques take valuable time and money to process. At the end of the day, typically the total cost of accepting paper rent payments exceeds the cost of credit card interchange fees.
It may be time for a new approach – one that encourages renters to pay online and discourages them from using paper cheques.
Consider adopting free online payments as the standard for your property management company and charging a convenience fee for renters who pay by cheque. Providing incentives for residents to pay digitally will not only save them the cost of the online convenience fee, but will save you a lot of time and money by cutting back on the number of cheques you have to process each month.
That alone is well worth the cost of absorbing credit card interchange fees.
Property Vista offers the option to charge convenience fees. We can also direct you to the best approach for your business, ensuring customer satisfaction while cutting costs.
To discover which payment model is best for you, and how to best embrace online payments, sign up for your free account today or give us a call to learn more.