Accepting credit card dues payments

I'm an officer on my HOA board and we are considering accepting credit card payments of dues. We annually have about a third of our homeowners pay late and a few who are over a year past due. If any you have experimented with accepting credit card payments, has it been beneficial? Have dues payments been received more timely as a result? Have you charged a convenience fee to cover the discount percentage and/or monthly merchant account fees? Do you use a card swipe terminal or online processing? Have you experienced any problems?

Thanks,
Eric in Georgia

A fellow board member thought that homeowners may be willing to pay with a credit card when they are short on cash. Also, he felt the prospect of earning points or miles may entice homeowners to pay on time.

Donna,
I thought along the same lines as you, but our VP thought it was a good idea. Our bank wanted an initial $400 setup fee including a swipe terminal and a monthly fee only when the merchant account is being used. I've also seen internet-only companies offering a flat monthly fee of $20 or so regardless of how much the service is used.

Frankly it sounds like more trouble and expense than it's worth. I personally think it would be a tough sell to the homeowners as a group if they knew all of the costs the Association will have to absorb to make it feasible. Using the low number of $20.00 a month times 12 months is $240.00 for something someone might use. If there are no charges in a month do you still have to pay? And if you pass the processing costs on to the user and only one person per month uses it do you honestly think they're going to pony up an additional $20.00 for the "privilege" of using a credit card? Who is going to process the charge for the HOA someone from the Management Company, a BOD member or an anonymous web site? Is there any liability to the HOA if someone's credit card is falsely accessed? What about if the card company refuses the charge or the homeowner after paying by cc then disputes the charge?

Eric,

I wouldn't mess with credit cards.

When I owned a business we accepted credit cards because it was more or less expected. For some people it is a convenience, We had to pay a monthly maintenance fee and a percentatge of each credit card transaction to the bank handling our credit card account. You usually can't charge that fee back to the individual because most credit card agreements and some states prohibit that (because it discourages credit card sales). Some states have laws requiring the the amount charged for goods or services be the same for credit cards as it is for cash, so you can't charge the fee back. Interestingly, some states do allow a discount for cash. But, in the case of HOAs there a catch-22 because in many states the fees have to be the same for everybody, so that rules out either discounts or add-on fees.

One thing you might consider, though, is offering direct debit (electronic transfer or EBT). That's a set-up whereby the fee is automatically transferred from the homeowner's bank account to your bank account on the same day each month. I have heard of that being done for HOAs before. You probably set it up through your bank. Then, you supply the homeowners with a form that they fill out and give to their own bank. I don't have any experience with that, so I don't know anything about whether there are any fees or not, but you may want to check that out as an alternative.

Thanks everyone for the good advice. Our HOA is relatively small (about 65 single-family homes) with dues of only $315.00 annually. I don't think the benefit of getting payments more timely, if it occurs, would be worth the up front and/or monthly costs the HOA will incur. Especially if the costs can not be passed on to the homeowner through a convenience fee.