Best ways for tenants to pay rent
The best ways for tenants to pay rent are certified payment methods. These are trackable methods that are more easily verifiable. Some methods are physical paper payment, such as cashier’s checks, bank drafts, certified checks, and money orders, while others are online.
Cashier’s check or bank draft
Cashier’s checks and bank drafts are secure forms of physical paper payment that a tenant gets from their financial institution, like a bank or credit union.
Financial institutions write cashier’s checks and bank drafts against their own funds instead of the tenant’s, guaranteeing a landlord’s ability to cash them. Therefore, unlike personal checks, cashier’s checks and bank drafts can’t bounce.
When a tenant gets a cashier’s check or bank draft, the bank withdraws the funds from the tenant’s account first. Therefore, the tenant must have enough money in their account to cover their rent amount.
Once the money is withdrawn from the tenant’s account, the bank writes the check or draft, naming the landlord as the recipient. When the landlord deposits it, the funds are drawn directly from the bank rather than the tenant’s account, eliminating the possibility that the check won’t cash due to insufficient funds.
Generally, financial institutions charge a fee to obtain a cashier’s check or bank draft. Despite being secure, these payment methods can be inconvenient for tenants because they may require the tenant to travel to their bank regularly. However, some banks may also offer them online.
As its name implies, a certified check is a check that a financial institution certifies, sometimes with a stamp and signature. Some banks charge a small fee for certified checks.
When a tenant goes to their bank to get a certified check for their rent, a teller will certify that the tenant has sufficient funds in their account to cover the check amount. In that sense, landlords can feel more confident that the check will clear than with uncertified checks.
Although they are more secure than personal checks, certified checks are not as secure as cashier’s checks, bank drafts, and money orders.
A certified check only proves that an account has the necessary funds available when the check is written. Many banks put a hold on the necessary funds to ensure certified checks clear. If a tenant’s bank does not put a hold on the necessary funds, there is no guarantee that those funds will still be in the tenant’s account when the landlord goes to deposit the check.
Like with cashier’s checks and bank drafts, tenants must have an account with a bank to acquire a certified check. Since certified checks have to be acquired in person at a physical bank branch, they can be an inconvenient payment method for a regularly occurring expense, such as rent payments.
Money orders are another form of physical paper payment. Tenants can get them from the following issuers:
Both the tenant’s and the landlord’s names have to be on the money order. Having the landlord's name directly on the money order ensures that only they can cash it, unlike with a cash payment.
Tenants must prepay the amount of the money order with a guaranteed form of payment
, such as cash or debit card. Therefore, money orders can’t be returned for insufficient funds. Money orders are either filled in by hand or electronically and printed. Money orders will also have the issuer’s name on them, or in some cases, the name of the financial services company that the issuer is representing (e.g., Walmart
as its financial services company).
Money orders are a very secure payment method for landlords because they can’t bounce or fail upon deposit. They can’t bounce because, unlike checks, they are prepaid, so the funds have already been drawn from the tenant’s account. In this sense, landlords can think of a money order as a gift certificate that only they can cash in.
Typically, issuers will charge tenants a fee for money orders. Some issuers, like convenience stores, typically charge less than banks for money orders.
Money orders can be beneficial for tenants who cannot use cashier’s checks, bank drafts, or certified checks, because of not having a bank account.
Online payment providers
Online payment providers allow people to send and receive money anytime, anywhere. These providers are sometimes called peer-to-peer (P2P) payment services
. Peer-to-peer payment services let you use a bank account or a credit or debit card to pay friends or family from your phone.
Online payment providers include:
For tenants, paying their rent with an app is convenient. For example, with PayPal, tenants simply enter their landlord’s email address or mobile number and specify the amount to transfer funds. When tenants use funds in their digital wallets or bank accounts, there are no fees. However, they must pay a fee for credit card and debit card payments.
With Venmo, both a landlord and tenant need the Venmo app to send and receive payments. Landlords can request rent payments from tenants. Because rent payments are not peer-to-peer, they are classified as business transactions. Business transactions come with a 3% fee.
While using an online payment provider may seem a bit unsafe to some, Venmo, PayPal, and Cash App are all secure and safe methods to pay rent
. All three of these providers encrypt every transaction to ensure your money is safely transferred.
Using an online payment provider for rent payments also eliminates the need to collect rent in person or by mail. For long-distance landlords, an online platform may be the best rent payment method.