Why I don’t take credit cards

A Landlords Thoughts on Ethics

I don’t take credit cards. I’ve struggled with this for years although I may have come to peace with it recently. We’re in the Corporate Housing business. A SMALL business, family owned and operated but we are growing and I’d like to see us….but I’m getting off topic. Here is why I don’t take Credit Cards:

Charge-backs

This isn’t the primary reason but its the first answer one might guess. The fact is we have had very few people who might do this but out of hundreds of people there are going to be some bad apples. There always seems to be that one person who wants everything and doesn’t want to pay for any of it. (Essentially by the way, that’s exactly what we do. We give as much as we can and stay afloat with a tiny margin) The charge-back is rare, but not at all unheard of and especially during harder times. When I mention small margin, I mean just that. We make money through volume, exclusively. So a charge-back on one months rent would eat up the profits of at least 5 apartments and that’s not even considering that they usually have a 30 day head start to dispute the charges and if they stay in the apartment then there’s another 1-2 months for an eviction process until finally the sheriff gets involved. That is all a nightmare scenario but it has happened to every company in this field no matter how exclusive. This would hurt and it would hurt us badly. Anyone who has ever rented out property cringes just thinking about it.

Fees are still not our primary reason to turn down credit cards. You should know however that there is a big scam that many companies offer. They quote percentages way below the 2.5% but they don’t mention that when you swipe the card, they have to be “approved charges” to qualify for 1% or 1.5%. When the bill comes at the end of the month guess how many charges made it to the “approved” rate? Almost none. So, here’s the math: Say you rented out an apartment for $1,000/Mo and the rental itself costs you $850/Mo and this is after recouping your costs of furnishing the place (4-5 months down the line). Your profit is $150/Mo. The credit card company takes out 2 (-if you’re lucky)-2.5%. Not bad right? $3.78. Multiply that by 100 apartments and your profit is $15,000/Mo. That is before operating expenses, Fed, State, and Municipal taxes, salaries, bookkeeping, secretarial, sales team, evictions, vacancies, charge-backs, building repairs, utility overages etc. After all that you might take home $75,000 actual/annually. Pretty nice right? The credit card company has $4500 of your hard earned money. Thats not 2.5%, thats 16.66% of what you take home! What if you just started offering credit cards and sales go up 25%. Great! You come home with $93,750/year and with 25% more labor and a year later you realize that the harder you work, the more other people benefit, and you are still out 16.66% of what you take home. Fair? no. Life? I’m not going to answer that one

Its ethical and feels like the right thing to do. It works out well to because it gives us an even bigger edge against our giant corporation rivals (friendly rivals). If you believe that good things come to those who do good, then you understand my thinking and what I hope for. I used the figure that we were saving and lowered rents by that much across the board (and a little more). That was years ago. I still do the same today. While I lose clients who equate us with a West African/Nigerian sort of scam even though the BBB A+ logo is right out in front (and click-able!) and everything we do is transparent from the get go, I’m still going to lose a few clients and then some. I don’t like bearing the brunt of an others misfortune any more than you would, its just not right. Now I’m not saying I’ll never accept credit cards, but if I do, I’ll be damn sure my clients don’t suffer because of it.

I hope that many of you share this view and way of treating a client like any other person in your life, with respect and fairness. I’m not perfect by far, but isn’t this what its all about? Aspiring to be more than the sum of our parts? I would gladly welcome any feedback anyone might have. Thanks for reading