Options for Multifamily Operators in Matching Credit Score with E-Pay

Advances in electronic banking now present multifamily operators with a host of automated rental payment options that can improve operational efficiency and cash flow. However, it’s challenging, even for the most savvy property decision makers, to understand which option is best for the different segments of renters. To set acceptable payment policies, your property company must decide its level of comfort with payment risk and determine who among your current and prospective resident pool has access to credit
The following highlights the pros and cons of the major automated payment options available today:

Accepting Rent with ACH

What was once an exclusive service primarily for private banking clients, automated clearing house payments (ACH) is now available on a broad scale to banking customers who are accustomed to maneuvering through the online bill payment services offered by most retail banks. For property companies, ACH payments have become a standard way to accept inter-bank rent payments from residents who meet top tier credit requirements for a lease. While ACH payments offer a convenient method to receive rent payments, they fall short when even the most credit-worthy residents don’t manage their bank account balances or choose to air a grievance by withholding money due. Hundreds of services exist today to manage your ACH needs, but it’s probably best to talk with your local bankers to determine which services they feel comfortable accepting.

Accepting Rent by Credit Cards

Similar to ACH, paying rent by credit card is a widespread practice today for residents who meet standard credit criteria. While fees to your company will vary based on your payment processor and your relationship with your bank, credit card payments offer a convenient solution to making sure rent is paid on time. In these economic times of tight wallets and under-employment, perhaps the biggest risk in accepting credit cards is knowing if your residents will build up more debt than their cards allow when it comes time to process payment for rent. Visa and MasterCard have made the greatest inroads into the rent payment market based primarily on the fee relationships with participating banks.

Accepting Rent by Debit Cards

Debit card payments for rent present different opportunities and challenges for communities and the landscape of debit card options is cluttered with choices for both residents with high credit scores and those without. On the plus side, bank issued debit cards provide all the convenience of ACH for residents who meet standard credit requirements, however, a certain amount of financial planning is needed by the resident to make sure of sufficient funds in their account on the day rent is due. As the renter segment that has access to bank issued debit products is also usually more financially savvy, mishaps aren’t a major problem. For residents who don’t qualify for ACH or bank issued debit products, prepaid debit cards are also an option. Newer products have added convenience features that allow direct deposit from payroll in addition to direct cash loads at the corner store. The complexity of the situation is that prepaid debit cards are used primarily by the segment of your renter population that has screened as less credit worthy and, therefore, have some history of not paying their bills on time. As a “virtual bank” in their wallets, prepaid debit cards are convenient for renters, but principally only as valuable to your communities on the first of every month as the amount of funds loaded to pay rent. Finally, prepaid debit card issuers are many and varied, and renters need to be careful in selecting a card with the lowest fees to load funds and access bill pay.

Accepting Rent with Rent Assurance

Rent Assurance is a new tool used by property companies across the United States to capture incremental occupancy by providing conditionally approved applicants with a simple ‘hands-off’ system to assure that rent is paid on time. The Rent Assurance direct deposit platform makes rent first-in-line from a resident’s payroll, providing property companies with built-in safeguards for continually reliable resident performance. To participate in Rent Assurance, residents must be employed by a company that offers direct deposit, which more than 90 percent of employers do, or receive monthly income electronically from another source such as Social Security, Pensions, Veteran’s Association Benefits, among others,and they must accept that their “installments” toward rent will be reported on a pay period basis to their community.

So, how do you pick the right electronic payment options for your communities? Experts at Neighborhood Pay Services suggest looking at the following guidelines:

1. Work with your screening company to assess the credit profile of your renter population.
2. Speak with your bankers, particularly if they’re located in the cities and towns where you do business, to understand how local consumers are feeling the credit pinch.
3. Evaluate where the greatest percentage of your payment problems are coming from. It’s usually an 80/20 rule that dictates that 20 percent of your renters are causing 80 percent of your rent payment problems. But dig deep to find out the credit profile of that 20 percent of problem makers to figure out if they’re using payment options effectively.
4. Think about what an extra 1-2 percent of incremental economic occupancy would mean to your bottom line and how to achieve it with rent payment services that meet the credit-payment performance needs of your communities.

Multifamily E-Pay Options

For more information on Rent Assurance from Neighborhood Pay Services, go to www.RentAssurance.net