Having tenants pay their rent by direct deposit tends to be extremely convenient for rental managers as long as everything is going well.
In the absence of difficulties, payments arrive on time, there is no paperwork or need to physically deal with checks or cash and it is typically easy to set up with most banks. The ability to monitor payments online can also be helpful, as doing so can lower administrative costs and time spent on accounting.
The convenience may also encourage tenants to pay on time and in full, and make it more difficult for them to present excuses justifying failure to do so. Whether tenants are honestly forgetful or trying to cheat their landlord, direct deposits may avert problems
Risks of direct debit
There are some potential flaws, however. Landlords and property management companies should ensure they understand any fees being charged by the bank receiving these deposits, and other costs or restrictions.
Bank policies vary somewhat concerning overdrafts on direct deposits, which could be a problem if some tenants are less careful to keep their accounts stocked. It will be necessary to monitor the account to ensure funds were properly received, but this is generally no more work than other methods of collection. When giving banking information to tenants, ensure that only necessary data is shared to maintain security and avoid fraud.
Category: Property Management