Collecting late payments via Credit Card

[Sean H.]

I own some rentals in blue collar areas. Some houses are notorious for being occupied for 3 months no issues, then late payments, then partial payments, then no payments, and eviction. They cash flow excellently when rented, so I do not want to get rid of them and I have trouble finding Section 8 tenants for these units.

What I am thinking is, have my property manager get their credit card number when they sign their lease. Have her download an app such as squareup (https://squareup.com/). Have a clause in their lease that states something like "On the 6th day of the month, if the rent has not been paid, the tenant agrees to have their credit card charged for the total rent amount, plus a $50 late fee, as well as any credit card processing charges." This will guarantee payment.

Payments charged would be something like this..

Rent - $450
Late Fee - $50
Credit card fee (2.75%) - $13.75
Total charged - $513.75

Has anyone tried anything like this? Is it entirely legal? Pros/Cons?

[Chris Martin]

Terri Pour-Rastegar It's nice to hear that your collections are pristine. But you can't screen for future problems. In 2011, my company's 'root cause' for evictions and abandonments were job loss, health related, and domestics (divorce, separation, etc.) in that order.

I'd like to know how you can tell, when a tenant signs your lease, that that tenant won't lose their job or they won't suffer a heart attack.

Not paying rent is never an excuse unless they just don't have any money or the means to pay. DD doesn't work if there isn't any money in the account. Do you screen to see if they have credit cards (or 401K, pension, car maybe?, etc.), or just a checking account?

For self managed property, our tenants can pay at WalMart for $0.88, and we'll pick up the $0.88 fee. But this option, again, requires funds currently available. Credit cards and borrowed funds (payday lenders, etc) sometines work if the tenant gets a new job or disability pay.