The main ways to accept credit card payments
You can accept credit card payments through a payment processor — a company that handles the transaction between your tenant or customer and the credit card network. The three most common routes are a merchant account (which connects directly to your bank), a third-party payment platform like Square or PayPal, or a property management software that includes payment processing built in.
Each route has different setup costs, monthly fees, and per-transaction fees. A merchant account typically costs $25 to $100 per month plus 1.5% to 3% per transaction. Third-party platforms like Square or Stripe charge no monthly fee but take 2.6% to 3.5% per transaction plus a small fixed fee (usually $0.30). Property management software that includes payments may bundle the cost into your subscription or charge separately.
The choice depends on your volume, your existing banking relationship, and whether you already use property management software. A landlord collecting rent from two or three tenants might use Square or PayPal for simplicity. A larger operation or property management company might negotiate a merchant account for lower per-transaction costs.
Key Takeaways
- Payment processors come in three main types: merchant accounts through your bank, third-party platforms like Square, and built-in payment tools in property management software.
- Merchant accounts have higher monthly fees but lower per-transaction costs; third-party platforms have no monthly fee but higher per-transaction costs.
- You will need a business bank account, an Employer Identification Number (EIN) or Social Security Number, and proof of business identity to set up any processor.
- Tenants paying by credit card may incur a fee, which you can pass to them or absorb yourself depending on your lease and local law.
- Payment processors report transactions to the IRS, so you must track and report all rental income regardless of payment method.
Setting up a merchant account through your bank
A merchant account is an agreement between you and your bank (or a third-party acquirer) that lets you process credit and debit cards. You contact your bank's business services department, provide proof of your business identity and tax identification, and sign an agreement. The bank then assigns you a merchant ID and connects you to a payment gateway — the software that processes the actual transaction.
Setup typically takes one to two weeks. You will need to provide your business license, EIN or Social Security Number, proof of address, and bank statements. The bank may also run a background check. Monthly fees range from $25 to $100 depending on your bank and the type of account. Per-transaction fees are usually 1.5% to 3% of the payment amount plus a fixed fee of $0.10 to $0.30.
Once approved, you can accept payments in person (with a card reader), over the phone, or online through your own website or payment portal. Your bank will deposit the funds into your business account, usually within one to two business days. This route works best if you already have a strong banking relationship or if you process high volumes of payments and want to minimize per-transaction costs.
Using a third-party payment platform
Third-party platforms like Square, Stripe, PayPal, and Clover let you accept payments without a traditional merchant account. You sign up online, provide your business information and bank details, and can start processing payments within hours or days. There is no monthly fee, but each transaction costs 2.6% to 3.5% plus a fixed fee (usually $0.30).
These platforms are designed for simplicity. Square, for example, lets you create a payment link that you can text or email to a tenant, or use a card reader for in-person payments. PayPal has a similar setup. Stripe is more technical and works best if you have a website or use software that integrates with it. All three report transactions to the IRS and provide year-end summaries for your tax records.
The trade-off is that per-transaction costs are higher than a merchant account, so this route makes sense if you have low to moderate payment volume (fewer than 50 transactions per month) or want to avoid monthly fees. If you process hundreds of rent payments per month, a merchant account will cost less overall.
Payment processing built into property management software
Many property management platforms — such as AppFolio, Buildium, Rent Manager, and Landlord Studio — include payment processing as part of their service. You do not set up a separate merchant account or third-party processor; instead, the software handles payments directly. Tenants log into the portal and pay by credit or debit card, and the funds go into your account.
The cost structure varies. Some platforms charge a flat monthly subscription (usually $50 to $300 depending on features and number of units) and include payment processing at no extra charge. Others charge the subscription plus a per-transaction fee of 2% to 3%. A few charge only per transaction and no subscription.
This route is most practical if you are already using property management software or planning to switch to it. You avoid setting up multiple systems, and tenants have one place to pay rent, submit maintenance requests, and access lease documents. The downside is that you are locked into the software's payment terms and cannot shop around for lower fees if you want to switch processors later.
What happens when a tenant pays by credit card
When a tenant pays rent by credit card, the payment processor takes a fee (usually 2% to 3.5%) before the money reaches your account. You have two choices: absorb the fee yourself, or pass it to the tenant. Your lease should state which applies.
Many landlords absorb the fee as a cost of doing business, especially if only a few tenants use credit cards. Others add a "convenience fee" or "processing fee" to the tenant's bill when they choose to pay by card. Some require tenants to pay by check or bank transfer at no fee, and offer credit card as a paid option. Check your local law before adding fees — some jurisdictions cap or prohibit credit card surcharges on rent payments, while others allow them.
Credit card payments are also slower to clear than bank transfers or checks. A credit card payment may take three to five business days to appear in your account, whereas an ACH bank transfer typically clears in one to two days. If cash flow is tight, this delay matters.
Tax reporting and record-keeping
All payment processors report transactions to the IRS. If you receive more than $20,000 in credit card payments in a year, the processor will send you a Form 1099-K and file a copy with the IRS. Even if you do not receive a 1099-K, you must report all rental income on your tax return.
Keep records of every payment: the date, amount, tenant name, and payment method. Your processor will provide a transaction history and year-end summary, but you should also keep your own records in case of a dispute or audit. If you use property management software, export and save your payment records at least quarterly.
If a tenant disputes a charge or claims they never received a receipt, your payment processor will investigate. Having clear records — the lease, the payment date, the amount, and any communication with the tenant — protects you. Most processors hold disputed funds for 30 to 90 days while they investigate, so cash flow can be affected if disputes pile up.
Comparing costs across payment methods
The right choice depends on your volume and preferences. Here is how the costs compare for a $1,500 rent payment:
| Payment Method | Monthly Fee | Per-Transaction Cost | Total Cost for $1,500 Payment |
|---|---|---|---|
| Merchant Account | $25–$100 | 2% + $0.30 | $30.30 (plus monthly fee) |
| Square / Stripe / PayPal | $0 | 2.6–3.5% + $0.30 | $39–$52.80 |
| Property Management Software | $50–$300 | 0–3% | Varies; included in subscription or $0–$45 |
If you collect rent from 10 tenants monthly (all by credit card), a merchant account costs roughly $30 per transaction plus $25 to $100 monthly, or about $325 to $400 total. A third-party platform costs about $40 to $53 per transaction, or $400 to $530 total. Property management software with included payments costs only the subscription, which spreads across all your tenants and features, making it the cheapest option if you use the software anyway.
Frequently Asked Questions
Can I require tenants to pay by credit card?
No. Fair housing law and most state laws require landlords to accept at least one payment method at no cost to the tenant. You can offer credit card as a convenience with a fee, but you must also allow payment by check, bank transfer, or money order without charging extra. Your lease should state which payment methods you accept and whether fees apply.
What if a tenant disputes a credit card charge?
The payment processor investigates the dispute, usually within 30 to 90 days. If the tenant claims they never authorized the charge or never received the service, the processor may reverse the payment and refund the tenant. You can dispute the reversal by providing proof — the signed lease, the payment date, and any communication showing the tenant received the service. Keep detailed records to win disputes.
Do I need a separate business bank account to accept credit card payments?
Yes. All payment processors require a business bank account in your business name or your name as the business owner. A personal account will not work. If you do not have a business account, open one at your bank before you set up a processor. You will need your EIN or Social Security Number and proof of address.
Which payment processor is fastest to set up?
Third-party platforms like Square and PayPal are fastest — you can sign up online and start accepting payments within hours. Merchant accounts through your bank take one to two weeks because the bank runs a background check. Property management software varies; some approve you in 24 hours, others take a week.
Can I accept credit card payments over the phone?
Yes, but only through a merchant account or a platform that supports phone payments. You will need the tenant's card number, expiration date, and CVV. Never store this information yourself; always use your processor's secure system. Some platforms like Square and PayPal support phone payments, but you must be PCI-compliant (a security standard that protects card data). Property management software usually does not allow phone payments for security reasons.