Pay to Play
As attractive as offering credit card rent payment is, though, such transactions typically involve convenience fees, which is an ongoing issue as the apartment industry pursues online rent payment.
Even firms such as RealPage have talked with credit card companies about offering attractive terms for property owners and residents, according to Turner. Convenience fees, she acknowledges, “are a possible disincentive for residents” and owners.
Not surprisingly, given such extra costs, apartment executives appear to appear to lean slightly in favor of checking-account debits as an entry point to online rent payment. “We are doing a lot with online rent payment [methods] such as direct debit,” says Steven Small, CIO of AMLI Residential Properties Trust in Chicago. “But the [problem with] credit cards is the attendant convenience fees.”
Other big firms agree. “It would be exceedingly simple [technically] for us to [make available] credit card payments, but there is a cost to accepting credit cards,” explains Dan Amedro, CIO of Archstone-Smith, an apartment REIT based in Englewood, Colo.
Those small fees would add up to big dollars, given the growing volume. Heather Campbell, vice president of communications and marketing at Archstone-Smith, says that in July 2005, the company collected $11.1 million in online payments, all direct debits. By contrast, in all of 2004, the company collected $11.3 million in online rent payments. “You can see how dramatic the penetration is in a relatively short period of time,” Campbell says.
Small, Amedro, and others agreed that transaction fees levied by the credit card companies– typically from 2 percent to 3 percent of each transaction– are the main barrier to wider adoption of online rent payment via credit card. But there are some early efforts to make fees less burdensome. In May, for example, RentPayment sought to set itself apart from similar services by setting a flat $12.95 fee per transaction, regardless of the payment method used.
Dan Urbina, vice president of sales and integration at RentPayment in San Francisco, says that many companies involved in online payment vary fees according the method of payment. Fees can even vary among credit cards. “That sends a convoluted message to residents,” Urbina believes, and creates an accounting nightmare for owners.
It also makes for a complicated process, which RentPayment hopes to simplify. With the program, a resident using a credit card to pay her $1,000 rent sees a charge of $1,012.95 on her monthly credit card statement, while the apartment company sees a $1,000 deposit. RentPayment “scrapes” away the $12.95 fee but never touches the actual rent money– it only serves as the middleman in the transaction.
The fee issue is even controversial among credit card companies, which have different sets of rules to which participating merchants and consumers must adhere, noted RealPage’s Turner.
MasterCard, Visa, and Discover Card’s application of the multifamily industry’s movement toward a “fair, flat and fixed” fee added to online rent payments varies among the credit card firms and the banks that issue them.
Others take a different approach. “American Express has very specific rules about not passing on fees to residents,” Turner says. “They position it as an amenity to your residents.”
Christine Elliott, a spokeswoman for American Express, confirms that American Express prohibits the levying of fees on rent payments charged to an AmEx card. Among both American Express “members”– the company’s preferred term for its cardholders– and among consumers in general, “interest in paying rent online goes down dramatically when a convenience fee is used,” says Elliott, who characterizes the convenience-fee debate as “a customer service issue.”
Lingering Frustrations
As they struggle to develop a system that will streamline accounting and satisfy residents, some owners express frustration at juggling what one called “an array of moving parts”: the third-party payment vendors, the property-management software developers, and the credit card firms.
“My main concern is having the easiest system for customers,” says Klug of the Sares-Regis Group. “When it comes to lack of compatibility [between a rent payment service provider and] our accounting system– please, someone else work that out.”
While Sares-Regis Group offers residents several methods of paying rent online, Klug says that residents tend to use the service sporadically. A credit card rent payment might make more sense around the holidays, when cash flow is tighter than usual, she says.
– Amy Rogers Nazarov is a freelance writer in Washington, D.C.