What to Know About Charging Payment Processing & Convenience Fees
What to Know About Charging Payment Processing & Convenience Fees
Landlords and property managers gain from providing a variety of payment choices, extra services, and facilities to their tenants to set themselves apart from the competition, whether in residential or commercial real estate. On the other hand, some landlords impose convenience commercial property management fees on specific selections to cover their expenses or as a strategy to increase money while offering a required service or amenity.
What Payment Processing Fees?
These are expenses incurred while processing consumer payments. Payment costs imposed on a commercial transaction are determined by several variables, including the transaction’s level of risk, the type of card used (reward, business, corporate, etc.), and the price structure chosen by a particular payment processor.
Most individuals rarely carry cash on them to pay for products and services. Due to the convenience of having plastic money rather than genuine hard currency, many consumers choose to pay with credit cards. A minor cost per transaction, known as the payment processing fee, is levied against companies that take credit cards and internet payments.
Convenience Fee Charged By The Property Management Company
Landlords may impose convenience fees for specific payment modes to cover their costs or make additional money while providing a helpful service or amenity.
Types of Payment Processing and Convenience Fees
What to know about charging payment processing and convenience fees is vital, and it’s critical to be aware of the benefits and drawbacks of each option and the regulatory, compliance, and reporting requirements connected with these sorts of charges before assessing convenience fees, surcharges, pass-through fees, and direct billed services to your renters.
Transaction Fees For Electronic Payment Processing
Landlords strive to provide tenants with the most convenient ways to pay their rent and other costs. One of its most essential features is UnitConnect’s ability to provide software that commercial property managers value.
To provide electronic rent payment choices, landlords must register a merchant account with a payment processor, which will charge a processing fee for each transaction.
When collecting rentals from tenants, a property manager should expect two forms of merchant processing fees, i.e., credit card processing fees and Automated Clearing House (ACH) transaction fees.
The following are the five significant categories of payment processing fees encountered in the rental real estate industry:
Charges for Credit Card Processing
A landlord is charged credit card processing fees for each incoming transaction. The merchant provider’s relationship with the credit card processor and the type of credit or debit card used impact the cost.
What exactly is the distinction between a convenience fee and a surcharge?
These words are frequently used interchangeably. You’ve probably noticed that the term ‘convenience fee’ is commonly utilized in property management software systems. The term “surcharge” is frequently used in retail to signify repayment for the processing fee expense. A ‘convenience fee’ is a charge for utilizing a different payment method option (which may also contain a high enough price to compensate for the cost).
ACH Transaction Fees
To cover the cost of the ACH service, the merchant service provider further assesses transaction fees to the tenant for each transaction. Transferring funds from the tenants’ banking institution to yours requires challenging technical procedures. The merchant service provider covers the cost of doing so swiftly and securely.
The rules governing financial regulations for credit cards and ACH transaction fees are different. You should be able to impose a convenience fee for using an ACH payment method, as the credit card network does not control it. When given the option to pay rent online, tenants are frequently more inclined to do so, so if you want to charge for the service, carefully assess the benefits and drawbacks. However, many tenants expect online payment alternatives as a free convenience.
Transactions Related to Property Management
In addition to using ACH to collect tenant-related payments, landlords and property management firms can use ACH transaction processing to assist with the following tasks on the functionality offered by the UnitConnect property management software:
- Supplier payments
- Owner distributions, also known as owner disbursements
- Contributions from the owner (such as reimbursement of costs and property reserves)
Remembering that transaction costs can quickly increase, given the variety of ACH payment and collection options, is crucial. By encompassing some or all of the costs associated with ACH transaction fees and regular merchant processing fees, the best property management software will identify ways to assist landlords in lowering those expenses.
Fees For Compliance and Errors
The expenses of failed transactions are incurred by merchant service providers, who then charge the landlord or property management firm for such costs. These are commonly assigned to the tenant to recoup your costs. Non-sufficient funds, returned payments, chargebacks, and bank mistake fees are a few examples of erroneous transactions.
Every tenant, vendor, or owner who might send or receive money via ACH through a property management platform must verify their identity based on the National Automated Clearing House Association (NACHA), which controls the ACH payment network. These affordable one-time costs pre-validate the information to lower the danger of fraud and mistakes.
Other Tenant Payment Options Fees
A cash payment network can be used in addition to or instead of a merchant processor to accept electronic payments. The landlord signs up with a cash payment network, receives a payment voucher from the tenant, and is added to the network.
In addition to needing to use property management software linked to that network of cash transfers, the landlord may want a one-time enrollment charge.
The cash payment site (often a convenience or shopping store in the tenant’s neighborhood) will assess a fixed processing fee when the tenant presents the printed or electronic voucher (accessible via their tenant portal or landlord) to utilize the service.
How Much Are Property Management Fees
According to a study on average rental property management fees, property managers often charge 8–12% of the monthly rent. Some firms may charge extra fees for services, including opening an account, renewing leases, performing inspections, and locating new tenants.
With UnitConnect’s automated payment processing, you can boost productivity and improve cash flow. With our tool, you can accelerate rent collection, stop bank runs, and simplify vendor payments. For a free demonstration of our residential payment processing solutions, contact us.