Why We Still Use Checkbooks to Pay the Rent
In 2007, Arlington (Va.)-based property management company AvalonBay Communities made a seemingly obvious decision. The company stopped accepting rent at its apartment buildings, and started making tenants send payments to a centralized office. Renters could put checks in the mail or use a new online system to transfer payments from one bank account to another. “We were unique,” says Mona Stahling, senior vice president for operational services, adding that in-person check payment was still an option for most landlords. Eight years later, 89 percent of the company’s 80,000 tenants pay their rent by electronic transfer.
It makes sense. Electronic payments save landlords the time spent waiting for postal service, as well as the trouble of processing checks. For tenants, electronic payments mean they can pay rent the way they already pay most bills. Across the U.S. economy, check use fell 57 percent from 2000 to 2012, according to the most recent data from the Federal Reserve. That’s particularly true for young renters, according to payments-industry giant First Data, which found that more than 20 percent of millennials have never used a check to pay a bill.
“Most young renters only have a checkbook to pay the rent,” says Jonathan Eppers, chief executive at RadPad, a Santa Monica (Calif.)-based startup that facilitates electronic rent payments. Despite the convenience to landlords and tenants of managing lease payments digitally, 70 percent of U.S. renters still pay by check, according to PayLease, another e-rent facilitator.
What’s going on?
First, the rental market is huge and fragmented. There are 43 million rental households in the U.S., according to the Census Bureau, including the very rich, the very poor, and everything in between. Electronic rent payments work great for tech-savvy millennials, less so for renters without bank accounts. Meanwhile, a property manager who has to collect rent for thousands of units has more to gain from moving payments online than a landlord with only a few units. “I like to physically make a deposit and walk out of the bank with a receipt in my hot little hand,” says Sandy Kepniss, who rents about 100 apartments in East Orange, N.J.
And old habits die hard, even for the tech-savvy. A survey published by the National Multifamily Housing Council found that 79 percent of renters would prefer to pay electronically. But the companies that help landlords accept e-payments have had to dangle goodies in front of tenants to get them to make the switch. RentMoola, a Vancouver-based startup, offers deals from companies that include Uber and 1800Flowers to renters who pay online. International Bancard, which operates an electronic rent-pay service, hosts pizza parties at which company employees walk tenants through the sign-up process, says Jessica Fields, a senior vice president at the company.
Checks, as a common way to pay rent, will almost certainly go away, eventually. The question is what type of payment will replace them. Smartphone payments service Venmo sees spikes in usage around the first of the month, spokeswoman Lisa Kornblatt says. Landlords, meanwhile, will likely continue to add options for tenants to pay online via bank transfer. And third-party players such as RadPad accept debit- and credit-card payments from renters, then cut checks to landlords.
One common transaction is mostly uncharted territory: direct credit card payments. Despite the convenience—and airline miles—that come with paying by plastic, there's a straightforward reason cards are unlikely to become the main way Americans pay rent in the near future: Processing fees usually come to around 3 percent, which either renter or landlord has to pay. The average traveler pays something like 1.2¢ per airline mile, says Brian Kelly, who blogs about credit-card rewards at thepointsguy.com. Paying 3 percent processing fees to earn miles “is like throwing money away,” he says.