Should landlords accept money orders for rent? Key considerations
Landlords can accept money orders for rent, but you need to carefully evaluate whether this method aligns with your rent collection goals. While money orders offer secure, guaranteed payments and accessibility for tenants without banking services, they also present challenges like potential delays and added inconvenience. To make the best decision, landlords must weigh the advantages and drawbacks of this payment method, and this guide has all of the details for you.
What is a money order for rent?
A money order for rent is a prepaid payment method that acts like a guaranteed check. Tenants purchase money orders from places like post offices, banks, or grocery stores and use them to pay rent when they don’t have access to other payment methods. Since they’re prepaid, money orders eliminate the risk of insufficient funds, which can make them appealing to landlords.
Key steps tenants take to use money orders for rent:
- Purchase a money order from a post office, bank, or authorized retailer.
- Fill in the landlord’s name as the payee and their own details as the sender.
- Keep the receipt as proof of payment in case of disputes.
- Deliver the money order by mail or in person before the due date.
Benefits of accepting money order for rent
Money orders have been a tried-and-true method for handling payments for decades. For landlords, they provide security and accessibility, making them a useful option in certain scenarios. Let’s take a closer look at the benefits.
Security
Money orders are considered one of the safest payment methods because they’re prepaid and can’t bounce. Unlike checks, you won’t need to worry about insufficient funds, and tenants don’t need a bank account to pay. For landlords who are concerned about bounced checks, this offers a lot of peace of mind, but it’s ideal to use rent payment software for added security.
Key security benefits of money orders:
- Prepaid, ensuring guaranteed funds.
- Payee-specific, reducing the risk of theft or misuse.
- Less fraud-prone than cash payments, especially when receipts are used as proof of payment.
Trackable
Paying rent with money order comes with built-in tracking benefits. Every money order comes with a receipt that tenants can keep as proof of payment, which helps prevent disputes. For example, if a landlord says they didn’t receive a payment, the tenant can use their receipt to prove when and where they made the purchase.
Landlords can benefit from this trackability in several ways:
- Easy to verify payment history during disputes.
- Useful documentation for tax reporting and bookkeeping.
- A streamlined process for keeping financial records organized.
Global accessibility
Money orders are widely available and don’t require a bank account, which makes them accessible to tenants in various financial situations. You can purchase money orders at post offices, supermarkets, convenience stores, and other common locations. For landlords, this means fewer barriers to collecting rent from diverse tenant groups. If your tenant demographic includes older renters or those who rely on cash, money orders can offer a practical solution.
Examples of where tenants can buy money orders:
- Post offices.
- Banks or credit unions.
- Retailers like Walmart or CVS.
- Grocery stores or convenience shops.
Potential challenges of accepting money orders for rent
While money orders have clear benefits, they aren’t without their downsides. They can create challenges such as inconvenience for tenants, delays in processing, and additional administrative work for landlords. These issues may impact both your tenants’ payment experience and your ability to maintain consistent cash flow.
Inconvenience
One of the biggest drawbacks is the inconvenience for tenants, and you may notice that this inconvenience leads to delays in rent payments. To get a money order, tenants have to visit a physical location, pay for the money order, and deliver it to you by hand or mail. Here are a few ways that money orders create inconvenience for tenants:
- Requires visiting a physical location to purchase.
- May involve waiting in long lines or finding an open retailer.
- Adds time to rent payment since the money order must be mailed or delivered.
To overcome the inconvenience tenants may face with money orders, landlords should consider offering more flexible and accessible options. Exploring the available rent payment methods for landlords, such as digital and automated solutions, can help streamline rent collection and improve tenant satisfaction. By expanding payment options, you can reduce delays and ensure on-time rent payments.
Processing delays
Processing delays are another common issue with money orders. If a tenant mails the payment, you’ll need to wait for it to arrive before you can deposit it. If the money order is lost or delayed in transit, both you and the tenant are left dealing with a stressful situation.
Stolen money orders add another layer of complexity. For example, there have been cases where thieves have targeted rent drop boxes, stealing and altering money orders. In situations like these, tenants often face delays while trying to recover lost funds, which interrupts your cash flow.
Fees
Although money orders are affordable, the fees can add up over time for tenants. A tenant who pays $5 to $10 per money order every month could end up spending $60 to $120 annually just on fees. While this may seem minor, it could be a source of frustration for tenants on tight budgets.
Summary of money order fees:
- Costs range from $1 to $10 depending on the provider.
- Tenants may face additional fees for expedited services or replacements for lost money orders.
- Annual fees for monthly money orders can impact tenants’ budgets.
Money orders also don’t provide the same level of financial insight as other payment methods. For instance, a bounced check may reveal useful details about a tenant’s financial stability, whereas money orders don’t provide this information. This lack of data can limit your ability to assess a tenant’s financial health.
How to handle money order rent payments
If you choose to accept money orders for rent, having clear policies is essential to ensure smooth transactions. Clear guidelines help tenants understand the process and minimize confusion or delays. By setting expectations upfront, you can make rent collection more efficient for everyone involved.
Setting clear guidelines
Make sure your tenants know exactly how to use money orders to pay rent. Provide written instructions on what details to include, such as your name, their name, and any reference numbers. For example, you might say, “Write ‘ABC Apartments’ in the payee section and include your apartment number in the memo field.”
Steps for setting clear money order guidelines:
- Include detailed instructions in your lease agreement or welcome packet.
- Provide examples of how to fill out money orders correctly.
- Encourage tenants to keep their receipts as proof of payment.
Establishing a payment schedule
Timely rent payments are critical for cash flow, so make sure tenants know when and how to deliver their money orders. If you accept mailed payments, encourage tenants to send them early to avoid delays. Offering reminders via email or text can also help tenants stay on track.
For example, a quick text a week before rent is due could say, “Friendly reminder: Rent is due by the 5th. If you’re paying with a money order, make sure to send it in time!” Simple steps like these make a big difference in avoiding late payments.
Can a landlord refuse rent payment in money orders?
Yes, you can refuse money order rent payment if your lease agreement explicitly states that you won’t accept this method. However, local laws may vary, so check with a legal expert to make sure you’re compliant. Some states require landlords to accept any form of legal payment unless otherwise stated in the lease.
How RentPayment makes rent collection easier and more secure
RentPayment simplifies the process of collecting rent by offering tools that show landlords exactly how to accept rent payments online. With options for ACH transfers, credit cards, and other secure methods, RentPayment helps landlords modernize rent collection while offering tenants the convenience they expect. By integrating online payments, you can save time and eliminate the common challenges associated with manual payment methods.
Severn Management Company Uses RentPayment to Improve Payments Experience
Learn about how Severn Management Company, a real estate development company based in Annapolis, M.D., uses RentPayment to reduce the time and workload of processing payments and improving the payments experience for residents.