In the past, self-storage businesses received the lion’s share of rental payments in the form of paper checks, but these are quickly becoming a thing of the past. Electronic-check payments, known as electronic funds transfer (EFT), are fast becoming an efficient, economical way for storage owners to collect funds from tenants.
According to the Federal Reserve, EFT transactions totaled 44.5 billion in 2004, exceeding paper-check transactions at 36.7 billion. The shift to EFT is one indicator of the growing role technology plays in business. The more significant impact of this trend is electronic checking competes with and complements credit-card transactions in providing optimum convenience for business owners and customers.
Credit and Debit Cards
Your facility may already accept credit cards for point-of-sale and automatic-payment transactions. Paying rent automatically by credit card offers many benefits for you and your customers. Tenants like the convenience, and storage owners report that auto-pay customers tend to rent for longer periods. Though you must assume the cost of credit-card transactions in the form of processing fees, your funds management still improves. Predictable and timely tenant payments relieve you of the tasks and expense involved in pursuing delinquent accounts.
Debit cards that carry the Mastercard and Visa brands can be used for transactions in which the exact amount of a sale is deducted directly from the cardholder’s checking account. They may also be used for transactions in which the cardholder enters a PIN to complete the sale. This method is used for point-of-sale transactions only, since the merchant cannot hold a customer’s PIN for use in an automatic-payment scenario. Many businesses prefer a debit-card transaction to paper checks because they are confirmed against a customer’s checking account balance before payment is approved.
The Benefits of EFT
An EFT payment, also referred to as an automated clearinghouse (ACH) payment, is a paperless transmission of money through a computer network. EFT provides an attractive payment alternative. It involves automatically debiting customers’ checking accounts when payment is due, and withdrawals register on their monthly statements. Since EFT payments are processed before paper checks at the Federal Reserve level, they ensure rapid posting to your business account.
To accept EFT, you need a merchant account with your bank or payment-processing company, along with an Internet connection to upload your batch transactions. You also need to file a Credit Exposure Risk Status Report indicating the maximum amount in EFT transactions you intend to process each month. Finally, you’ll have to pay processing fees.
Generally, you’ll pay a fixed monthly fee to your bank or processing company for use of its online service center, which allows you to upload transactions and retrieve activity reports. This fee might range between $20 and $25. You’ll also pay a flat or per-transaction fee for your EFT processing, based on the rate you negotiate. These “file fees” are competitive with credit-card transaction fees. They might range from $20 to $50 if you pay a flat monthly fee or approximately 10 cents if you pay per transaction. You might also pay an account-setup fee as well as charges for nonsufficient-funds (NSF) transactions, though these are much less expensive than NSF charges on paper checks.
How It Works
To automatically debit a customer’s checking account, you must have the tenant sign an authorization form for you to keep on file. (If the account is joint, both account holders are required to sign.) Next, you run one of your customer’s blank checks through a magnetic-ink check reader, which transfers the account and bank-routing numbers into your management software. Every day, your management software will display a screen to let you know if you have EFT payments to process. The software sends all the information directly to your bank or processing company in a batch, and you never see tenants’ personal financial information.
When your batch uploads to the bank or processing company, it’s transmitted to the ACH. From there, each transaction from the file is sent electronically to the customers’ banks, and each account is debited for the amount of payment. The transactions are then sent to your bank and credited to your account. The turnaround time for the batch transaction, from upload to deposit, is less than 48 hours. If a customer’s payment is for some reason reversed, you’ll know within 24 hours.
Electronic banking allows storage owners to deposit funds without going to the bank. It also establishes a more positive relationship between the business and customer, as it eliminates many scenarios involving late payments and fees. EFT is well on its way toward being the norm in everyday self-storage transactions.
Alison Kiesa is the sales and marketing director of Syrasoft Management Software LLC, which has produced management-software solutions for the self-storage industry since 1991. For more information, call 800.817.7706; visit www.syrasoft.com.