Why can't we pay rent by EFT
October 10, 2012 8:02 AM   Subscribe

Landlords of AskMe: Why won't most landlords accept rent by way of electronic transfer?

I've read this question and this question on why EFTs haven't replaced paper checks in the U.S. to the extent they have elsewhere in the world. I think I understand why U.S. banks aren't keen on replacing paper checks right now, and why people don't want to pay fees for wire transfers. However, through Chase I can transfer money for free to someone, using just their email address. I assume other banks have this type of payment/transfer option these days as well. I don't have to have a routing number and account number, as far as I know. So why are most landlords still wary of accepting rent by EFT? Is there a complicated process on the other end that makes it a hassle for the landlord to accept the payment? It doesn't seem to cost anyone and it seems much easier for all involved parties, so I must be missing something. If you are a landlord who prefers paper checks to EFTs, please describe why. Thanks!
posted by CheeseLouise to Work & Money (28 answers total) 6 users marked this as a favorite
Not a landlord, but maybe they like collecting the occasional late fees when checks come in late? No chance of that with an immediate wire transfer.
posted by Grither at 8:10 AM on October 10, 2012 [2 favorites]

A couple of thoughts - some banks charge fees for incoming wires/transfers. Also, sometimes the people doing the rent roll may not have access to the bank statement, so it's an additional step to see if it comes in.

And, it's hard not to accept rent from someone if you're kicking them out if they can automatically wire it in to your account.
posted by needlegrrl at 8:12 AM on October 10, 2012 [2 favorites]

Inertia and resistance to change; existing processes for accounts receivable (for larger organizations). My company builds software for large property managers, and taking electronic payments is a big win for them but it takes a lot of doing.
posted by chesty_a_arthur at 8:14 AM on October 10, 2012 [3 favorites]

I'm a landlord (small time, only one property) and I've actually looked into building a service to collect rent payments electronically with a plan to market it to other landlords. The ability to initiate a debit is really attractive because a landlord really just wants to get paid on a timely basis. The problem I encountered a few years ago when pursuing this line of thought was that it is hard to do without incurring at least 2% of fees as the landlord.

If this has changed I'm very keen to know of it because I think it is in everyone's interest.
posted by dgran at 8:17 AM on October 10, 2012 [6 favorites]

I asked my (small-time) landlord about this and she said that she liked the paper trail of having checks go to her accountant, so I'm guessing mainly resistance to change.
posted by ghharr at 8:19 AM on October 10, 2012 [1 favorite]

Primarily, a lot of markets are landlord-controlled with excess renter demand and insufficient rental supply. There is no incentive for the landlord to make it easier for renters, since renters are already competing for available supply. Further, there is a disincentive to accept EFT, since landlords can make money off of late fees.

Secondarily, accepting EFT is a renter benefit that is only visible after the renter signs the lease - it isn't something renters tend to think about when looking for a place. There isn't much reason for landlords to make renters happy after they sign the lease; at that point, the renter is already set in the place.
posted by saeculorum at 8:22 AM on October 10, 2012 [2 favorites]

Most of the apartments I've lived in have been rented from one-person-who-has-one-or-two-buildings, and, in my experience, the reason is that they just don't get the whole computer thing.

I have my bank write and send a check (electronic for me (with no stamp charge!), paper for them), and even that was considered some wild and crazy thing by at least two landlords I've had.
posted by phunniemee at 8:25 AM on October 10, 2012 [3 favorites]

A lot of land owners own one or two units.

I work with a coworker who rents out one house.

My own apartment is one of two in the same house that our landlords own.

Incurring the fees on a wire transfer (and my small, local bank does not do person-to-person transfers) probably isn't worth the convenience of it to them.

For large realty companies, it may make some sense. But for smaller ones, maybe not. And again -- see that some banks still do not allow for person-to-person transfers that I couldn't do it even if I wanted to, so I pay by check.
posted by zizzle at 8:32 AM on October 10, 2012 [1 favorite]

I think you may underestimate how technophobic a lot of Americans are, especially people old enough to have the kind of capital to own rental property. Paper checks feel more like "real money" to many people, and online banking can be intimidating or inaccessible.

I'm thinking of my father, here, who took his paper check to the ATM to deposit it every pay period, and complained bitterly when the forced him to get direct deposit. He would check his balance and move money online, but he liked the feel of those paper checks.

I'm thinking of my mother, who is in her early fifties, reasonably smart, and couldn't figure out why her facebook comments weren't posting. (Answer: she didn't know that she had to hit "enter".) I can't imagine her being able to figure out Bank of America's system of passcodes and secret keys.

I'm thinking of several people I know in their twenties who won't use debit cards, because they spend plastic much more easily than cash. Some of these folks were practically born with their hands on keyboards.
posted by catalytics at 8:34 AM on October 10, 2012 [1 favorite]

I'm a landlord (again, small time - I'm a live-in landlord of a two family house). I actually used to have a tenant on rental assistance, and the agency paying most of his rent would direct deposit it into my bank account. For the rest of it, I'm fairly comfortable with the current setup. I still write checks for things, and all of my tenants have written checks to me. I wouldn't be averse to it - if and only if it was free to me - but I suspect a lot of small-time landlords aren't totally shifted to being all online banking all the time.
posted by rmd1023 at 8:35 AM on October 10, 2012

I wish to god I could get my current tenants to ACH their rent like my last tenant did (or EFT). There was no barrier on my (the landlord's) end, no fees on my end, and no downside that I encountered, and I prefer it. If there had been a fee, I would have said "no" or required them to cover it.

I was initially (frankly) slightly nervous about giving my tenant the account information necessary for her to set it up, but I got over it. After all, I trusted her enough to rent an apartment to her. However, her bank required her to split the rent into two payments on two different days because it was over the allowable limit (which really surprised me because her rent was under $1350/month). (Her bank was Chase, and she definitely needed my account/routing number and needed to split the transfer over two days. This was only 2010-2011, too.) These latter two things might cause some landlords to think it's more trouble than it's worth.
posted by crush-onastick at 8:38 AM on October 10, 2012 [1 favorite]

Oh, I'm only 40, which is ancient in technology years. My mom, who is 70, and also rents out a single dwelling she inherited from her mother, is likewise not afraid of accepting rent electronically. Her tenant just won't do it either.

I guess my point is: with management companies, there are probably institutional barriers, but with individual landlords, it's all personality quirks of landlords and tenants.
posted by crush-onastick at 8:41 AM on October 10, 2012

My (small-time) landlord runs a electronic money transfer business as her primary job, and I *still* pay by check (issued/mailed by my bank). She never offered me the option to pay electronically, and for me the bank-issued check is nearly as convenient as an ACH, so I didn't bother to ask. But I admit I'm curious!
posted by mskyle at 8:45 AM on October 10, 2012

I don't know about every bank, but the Chase epay system does prompt the recipient to create an account on the Chase website that must link to their bank account in order to accept payment. So not a huge deal, but a minor annoyance.
posted by Wretch729 at 8:57 AM on October 10, 2012

I tried setting this up to my management company, and the problem wasn't so much them, it was that it was really non-trivial to get my small bank's e-payment system (contracted out) to pay money to a company who wasn't in their system (an individual would have been easier). And probably every bank uses a different such system, etc. I probably could have gotten it to work eventually but just gave up, because having the bank mail a check is no different on my end. My landlords would probably be happy with this if it were possible (the default way to pay rent is to deposit it into a bank account) but it seems like the infrastructure can definitely impose barriers.
posted by advil at 9:08 AM on October 10, 2012

When you send payments "via email" like this, it's only streamlined if the sender and recipient both have accounts at the same bank. If not, the recipient receives an email telling them that they need to go to the sending bank's web site (Chase, in this case) and set up a user account and provide their routing/account info so that the sending bank knows where to send the funds. If every tenant uses a different bank, the landlord is going to have to go through this account setup process for lots of different banks, which isn't really a scalable solution depending on how many tenants there are. Unless/until all the major banks and credit unions settle on a common centralized system for sending payments via email like this, I'm afraid it's not really going to catch on.
posted by Nothlit at 9:15 AM on October 10, 2012 [4 favorites]

I've had problems with them. Many transfers have gone through, using my account numbers. Recently someone eventually presented me with a notice they received from their bank, saying that my bank had declined the transfer. No reason given, nor did my bank have an explanation. The payer then claimed, now weeks later, that it was not their fault because my bank had declined the transfer.

From then on out I ask that a valid financial instrument be placed in my possession. An incomplete money transfer is a civil breach of contract. Once a check has been "uttered," or placed in my possession, to cancel the funds after that point is misdemeanor criminal fraud.

An uttered check that is bounced or canceled, in NY, carries up to a $750 penalty, and will become a police matter. However, collecting a botched money transfer requires suing the issuing party in civil court.

Also, a post-dated or incorrectly written check is never uttered, and can only be pursued as a civil breach of contract instead of a crime.
posted by StickyCarpet at 9:16 AM on October 10, 2012 [2 favorites]

Thanks everyone for the thoughtful responses. Sounds like the EFT process is still problematic between people using different banks and can indeed be a hassle for the recipient, so there's my answer.
posted by CheeseLouise at 9:26 AM on October 10, 2012

I'm a landlord. I know of other landlords here in Texas who do use electronic transfer. I don't because I'm not quite sure what the deal is, am too lazy to look into it, and I and all of my tenants are used to heading around checks.
posted by cmoj at 9:31 AM on October 10, 2012

My landlord would prefer electronic funds transfers, I'm pretty sure--I paid my first+last+security deposit via PayPal, and it takes him forever to get around to depositing my checks. But the lease is some kind of boilerplate from legalzoom.com and it says that rent has to be paid by check or money order, so...I pay by check or money order. So the inertia of these legal documents is another factor.

Also, these Chase QuickPay type solutions' being integrated into bank websites is mostly a recent development, they've only started to take off in the last year or so and many banks, even major banks, still don't have them. I'd give it some time. (Stuff like PayPal has been around for a while, but PayPal's payer-favoring dispute resolution makes it a suboptimal choice for the payee if he or she can easily get paid a different way.)
posted by phoenixy at 9:50 AM on October 10, 2012

Previous landlords (all owners of a handful of properties) have declined electronic payment. They were weary of banks and tenants having any more information about them. Heck, one landlord wouldn't even tell me his last name.

My newest landlord just asked everyone in the building to start paying by Chase Person-to-person Quickpay. In a way it's great because I don't have to write a check, and can pre-schedule payments. My landlord probably likes getting his money on day 1, whereas he used to end up cashing checks around the 10th. The only annoyance is that I had to set up an online user account (not a bank account) and it takes a few days because you have to put in your account info, look at a code that posts on your account, then come back in to verify the code etc. He gave us $10 off rent the month we started it as an incentive to deal with the BS. It costs me nothing beside the extra 10 days of float, and I don't think he receives fees or needs to give any info to tenants besides the email address to send it to. Granted, he's in his 30s, so is probably less tech-adverse than an older landlord and was willing to set up a Chase account to receive payments.

Once landlords learn that they can do this without fees I think they'll jump on board, but getting tenants to go through the process will take a bit of convincing in some cases. I really wish I hadn't had to set up a Chase account, but travel enough to have paying not by check very attractive. So basically, I'd guess it isn't more widespread due to lack of education about services out there, and not wanting to set it up/deal with it.
posted by Bunglegirl at 10:06 AM on October 10, 2012

It sounds like we're talking about a lot of different things, actually. As a landlord, I have no problem with my tenants using EFT, set up with their bank like any basic autopay or direct deposit system where I have to do nothing but confirm the funds are in my account on the right day.

Something like a PayPal system or a bank system set up requiring people to have an app on a mobile or a user account or anything which would require a new set-up every time I had a new tenant (or that would start generating costs to me or my tenant) would be wholly unacceptable to me as a landlord. I have a bank account for the property already, with account and routing numbers that are sufficient for accepting cash, paper checks or ACH/EFT without a third party system. Especially ones with new and exciting fees or dispute systems that differ significantly from the existing ones
posted by crush-onastick at 10:09 AM on October 10, 2012

I am a landlord (small time - 2 apartments). I strongly, strongly prefer Paypal - they can send it to my email address, which cuts down on the hassle of account numbers / different banks. As long as they have money in their Paypal account, there are no fees charged to either party.

Having an electronic trail and me not having to drop a check at a bank every month makes this the best choice possible. Easy to return a deposit even if you don't have the former tenant's new address.

If a tenant wanted to use an EFT with me rather than Paypal, I would be a bit put out. They just send me money using my email address? What do I do then? Do I have to create an account? Do I have to go find a check to figure out my account / routing number? How secure is this transfer? What happens if the person doesn't have the money?

Those kinds of thoughts would keep me from immediately okay'ing the proposal.
posted by amicamentis at 10:55 AM on October 10, 2012

If the root issue you're trying to address is "I'd like a more convenient way to pay my rent," then I'd look into whether your bank's online banking has some kind of bill payment feature. On the ones of these I've seen, if the payee doesn't accept EFT, the bank will print and post the check for you.

The one through my bank is awfully easy. Just set it up one time, and all I have to do is make sure the money's where it needs to be, and the landlord gets a check on predetermined date. It's pretty great.
posted by colin_l at 11:29 AM on October 10, 2012

However, through Chase I can transfer money for free to someone, using just their email address. I assume other banks have this type of payment/transfer option these days as well. I don't have to have a routing number and account number, as far as I know.

I am a landlord. I would adore it if there were a straightforward way that my tenants could put their rent in my account once a month. (My previous renter, whose housing was paid for by the military, could do this, and it was fantastic.) But apparently there is no straightforward way to do this. (I don't like PayPal, and I don't want to have to be moving money around.) Our bank can't accept EFTs and apparently it can't send them either---the best they can do is to either (1) wire money, which costs $20/wire, or (2) physically cut and mail a paper check, which I have initiated online.

It's totally dumb. But taking the approach that landlords are too hidebound or technophobic to accept EFTs is misunderstanding the state of electronic banking in the US.

(So our current renter handed us 3 months rent, in cash. I'm not complaining, but it would be easier logistically if the money just appeared in our bank account!)
posted by leahwrenn at 11:41 AM on October 10, 2012 [1 favorite]

I'm a landlord, with one rental house all the way on the other side of the continent. We actually encourage our renters to use EFT because we don't want checks lost in the mail, and getting to the bank to deposit is a huge hassle. In fact, we knock $25 off the months rent if it arrives electronically, and yet a further $25 if it lands in out acct before the first of the month, when the mortgage is due. Those are awfully appealing incentives and they make our lives so much easier when the tenants take them. Win.

We bank through a credit union and our most recent crew of renters couldn't pay by EFT until someone opened a credit union account. So I concur with the observation of a general problem of connectivity.

I suppose Paypal is another option, but I don't want to pay the fee.

But I will say: when it's in place, it's awesome.
posted by Sublimity at 11:52 AM on October 10, 2012

I was a landlord. My tenet started paying me through his credit union's billpay. They issued a paper check every month.

After a few months, the credit union sent a letter saying that if I gave them my bank's information, they could do an electronic transfer. I filled out the paper work and next month the money just appeared in my account.
posted by wrnealis at 12:33 PM on October 10, 2012

My building just got bought by a new management company and they can now do electronic transfers, but the old landlord would only take paper checks. So I think it just depends on whether the landlord wants to bother. The new company is much bigger than the old one so maybe it is more cost effective for them to set up.
posted by interplanetjanet at 12:54 PM on October 10, 2012

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