4 Reasons for Landlords to Avoid Money Orders

by Chris on July 7, 2014

Do you insist on money orders for rent payment? Many landlords do.

Some do it because they are concerned about cash in drop boxes or in the office. Others feel it’s a safety blanket that protects against bounced checks. A few do it out of habit.

tenant screeningBut, like everything in life, collecting rent payments is a balancing act. When it comes to money orders, what’s most comfortable for the landlord may be harder for the tenants – and that’s a problem.

Money orders offer some advantages, but there are four disadvantages:

1. Obtaining a money order every month is difficult for the tenants, and that is a major disadvantage when it comes to on-time rent payments. Landlords can’t always rely on late fees to make up for loss of cash flow.

The best policy for rent collection is to be as flexible as possible. Offering any variety of payment options will increase the likelihood of on-time rent payments, and foster a better relationship with tenants, who appreciate the convenience. Electronic payments are safe, fast, and best of all, many tenants like to pay that way.

2. If money orders are required over fear that the tenant is a deadbeat, this strategy doesn’t solve the problem. In fact, it only offers a false sense of security. There are better ways to deal with a tenant with credit issues.

For instance, rather than relying on money orders for protection, landlords should adopt a standard tenant screening policy that looks at credit, eviction, and criminal history before accepting an applicant.

Should a tenant be acceptable on other factors, but in the margin with credit, one option may be to accept a lease guarantor. Landlords also can offer a shorter lease term and then renew periodically if the tenant shows a good payment history.

3. Money orders can be stolen — not as easily as cash, but it does happen. In fact, a Florida sheriff last year warned area landlords to stop using rent drop boxes after dozens of leasing offices were targeted by thieves. Several money orders were stolen, altered and cashed. That left landlords and tenants to duke it out over who was at fault, and how the rent will be paid.

Unlike personal checks that come from the tenant’s bank, a money order can be issued by a number of different vendors. That means tenants may get the run-around as they seek a refund for lost money orders, and that will delay rent payment.

4. Some landlords like to use money orders to avoid bounced checks. It is still possible that the money order will be dishonored or payment cancelled for any number of reasons, although the likelihood is remote.

But the troubling issue is that a money order won’t tell you much about the tenant, except perhaps were they shop for groceries or gas. A personal check, on the other hand, can flag when a tenant has changed names, phone numbers, or banks. This information will be critically important if the account ever has to go to collection.

Many states provide a civil remedy specifically for bounced checks that protects landlords from losses. In addition, it may be possible to charge a bounced check fee in the lease agreement. This may offer the same level of protection without the risk of losing valuable data on the tenant.

On-time rent payments are key to profitability, and that means it pays to be flexible. It’s a good idea to keep that in mind as you decide your rent payment policies.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

{ 2 comments… read them below or add one }

Pamela Holleman December 23, 2014 at 11:53 am

Could thus article be printed and mailed to my lnd lord? Well property manager. He has lost one MO in the past that came in the mail with 2 other money orders. So we know it was received. Now he says he has not gotten the whole payment at all ( for the size of the rent it takes several MO.) I have a set income that comes in at the first of the month. I can not afford to give him a new MO when one goes missing, and then wait for the investigation to get the money back from the missing ones.
He/they insisted on MO from the start. If whenI were allowed to pay by check with other land lords, I could always cancel the missing one and write a new one. I really want to pay directly through automatic payments or even on line. But do not know how to encourage the company to do so and I have no way of communicating to them with out going through their agent, who is a sweet but stubborn old goat.

Jill July 31, 2017 at 7:27 am

This cash and money order thing is bull in this day and age. It puts the tenant at tremendous risk of loss, theft, being mugged (landlords that want cash only usually are not renting in the best neighborhoods) and even fraud from the landlord. If you’re a landlord, open a PayPal and/or bank account for your deposits so folks can automatically transfer the Money and there’s a record of it. What’s often going on with small landlords is they don’t want Uncle Sam knowing about the rental income. NOT THE TENANT’S PROBLEM!

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