Paying rent or deposits with a credit card
The cost of moving for tenants can be expensive, with most tenancy’s requiring the first month’s rent and deposit to be paid at the same time at the start of the process. Due to these high costs some tenants may choose to make the payments via credit card, which might seem a convenient payment method despite any handling charges. This convenience, though, often comes at a substantial cost to both the tenant and potentially the agent.
The risks of paying a deposit with a credit card
By allowing a tenant to pay via credit card, the payment is then being made by the credit card company as a separate arrangement with the tenant. This means that the credit card company then fits within the definition of a relevant person within the tenancy deposit protection provisions of the Housing Act 2004 and therefore they must be provided with the prescribed information regarding the deposit. Failing to do so could result in the tenant making a claim, for not providing the prescribed information. It could also result in a Section 21 notice being invalid.
Agent’s will also be at risk of losing the money in the event of a dispute, which we will discuss further below.
The risks of paying rent with a credit card
Unless limits on the way payments can be made are stated in the tenancy agreement, tenants can opt to pay rent via a credit card and there is nothing to prevent them from doing so. However, doing so is not always the best option for the tenant and can come with risks for the agent, the main risk being that in the event of a dispute, credit card companies can take back the money, leaving the agent out of pocket if they have already transferred this money to the landlord.
Some tenants will choose this option as to avoid certain situations like late payments, however it is worth reminding them of any fees and interest that might be involved so that they have a clear understand before they go ahead with this method.
Although it is important for agents to be flexible with the payment methods they choose to accept, it is also important to know the risks involved. Plus, it’s worth considering whether a tenant is a reliable tenant if they are using a credit card to make payments, as this could mean they will struggle with rental payments at a later date.