ACH Rent Payments: What Landlords Must Know

ACH rent payments are a low-cost, secure, digital solution for landlords to collect rent from tenant bank accounts. However, there are key differences between ACH payment providers that every real estate owner and manager should understand.

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2024 is the time for landlords to join the ACH movement

There were 8.3 billion ACH payments in the second quarter of 2024, an increase of 6.3% over the same period in 2023. 

ACH payments are growing in popularity because they offer low transaction costs for merchants and streamlined experiences for consumers. 

Plus, the systems surrounding ACH are evolving — creating fast, seamless, high security transaction experiences. 

If you own or manage rental properties, ACH payments are the best way to collect rent online — but some solutions are more beneficial than others. Learn how to spot the differences in this post. 

An overview of ACH payments

“ACH” stands for Automated Clearing House, a network that is operated by the National Automated Clearing House Association (NACHA). Businesses, third-party providers, banks and credit unions send and receive electronic payments through this ACH network. 

What is an ACH payment? 

ACH payments electronically move money from one bank account to another. ACH is also called direct debit, EFT, electronic bank transfer and eCheck.

Who uses ACH payments? 

ACH payments have become especially popular for use cases like recurring payments, direct deposits, and large sum transactions. This is because the ACH network is an excellent facilitator of both direct debit payments and recurring ACH credit (also called “pull”) payments.

What are the benefits of ACH payments? 

Businesses add ACH payment systems thanks to advantages like:

1. Low processing fees. ACH payments have considerably lower transaction fees, they’re typically 50-70% cheaper for landlords than cards. 

2. Fast fund settlement times. ACH transfers typically settle in 1-3 days.

3. Reduced risk of fraud, failures, and chargebacks. 

4. Improved cash flow management. Transparent, regular fund settlement means low-hassle cash flow for property owners. 

As a bonus, ACH payments satisfy modern consumer demand for efficient digital transactions, contributing to improved satisfaction, loyalty, and higher customer retention rates.

What landlords need to know about ACH rent payments

New systems are being layered onto the traditional ACH network thanks to advancements in financial technology (fintech). 

An emerging solution using ACH for payments (including monthly rent payments) is called account-to-account (A2A) payments. The next section explains how A2A payments work and why they’re different from traditional ACH for rent payment. 

Traditional ACH vs. A2A payments for rent

The actual ACH transfer system in the US was created in the 1970s by the Federal Reserve Bank System as an alternative to paper checks. 

Over time, ACH payments became available for online payment, but they involved 1 of 2 limitations:  

1. Consumers had to provide their account and routing number to connect their bank account. This process is manual and poses security risks for both tenants and landlords. 

2. Bank accounts were connected using “screen scraping” where automated scripts (like web crawlers) log into a user's bank account with their credentials, extract the displayed financial data, and use it elsewhere. This process is unreliable, risky, and being actively banned by upcoming open banking payments legislation. 

Now, bank linking technology (like Aerosync) allows consumers to log in to their bank directly — establishing a secure, live connection. This is done using secure APIs between the bank aggregator and banks, credit unions, or other financial institutions.

These API-based payments are called account-to-account payments — a next-generation bank-to-bank payment system with no account or routing numbers needed to link a bank and send payment. 

Aeropay specializes in account-to-account payments and works with 12,000+ financial institutions nationwide. We simplify the rent payment process so landlords and property managers can enable recurring, guaranteed ACH transfers.

How ACH rent payments work

ACH rent payments are easy to set up. And once a tenant enrolls in automatic monthly payments, they’re easily set to recur without disruption. 

Here’s how an ACH rent payment works:

1. Tenant links their bank account: To initiate an ACH payment, landlords must first establish a connection with the tenant's bank. Old solutions use bank account numbers and routing numbers to do this, but A2A technology establishes the connection using a bank aggregator.

Landlords simply send a payment link to their tenants (a process that can be automated) or embed a payment gateway on their website. This enables renters to log in to their bank account through a secure portal without providing any personal financial information. 

2. Tenant authorizes payment: The tenant consents to the date and amount of rent to be sent from their bank account. Passwordless authentication verifies a user in seconds using their device's face or touch ID.

3. Payment is initiated: On the agreed-upon date, the ACH payment is triggered, transferring funds directly from the tenant’s account to the landlord’s designated bank account.

4. Funds are transferred: The payment is processed through the Automated Clearing House network. Depending on the type of ACH transfer (same-day or standard), the funds will typically be available within 1-3 business days.

5. Payment is confirmed: Both the tenant and landlord receive notifications confirming the successful transfer.

6. Recurring payments: If the payment is set as recurring, this process occur automatically every month until the contract ends or the agreement is changed.  

Benefits of ACH rent payments

ACH payments are a modern solution to the problems many landlords face, offering:

Lower cost

Accepting ACH payments from tenants can save landlords thousands of dollars per year. The more rental properties you own, the greater your savings.

Popular rent payment methods like debit cards or credit card payments typically come with fee pricing between 3-5% of each transaction. While physical checks are cheaper to process ($1-2), they incur additional costs from the time-consuming manual action of receiving, managing, and depositing each one. 

Aeropay data found A2A payments are up to 72% more affordable than cards, with median fees between $0.26 to $0.50 per transaction. 

Durable payment info

Cards expire every three years on average. Plus, many consumers lose or replace them sooner.

On the other hand, U.S. adults use the same primary checking account for more than 17 years on average.

Linking tenant bank accounts for automatic payment ensures longstanding account information, removing uncertainty around payment processing and maximizing completed transactions. 

Tenant-friendly

8 in 10 tenants want to pay rent online without incurring a service fee. And 69% prefer online rent payments. 

Plus, a recent Aeropay poll found 96% of consumers believe tenants should not pay additional payment processing fees on top of rent.

ACH payments are a preferred form of payment for tenants because they streamline the movement of money. Tenants more easily avoid late fees with autopay and funds aren’t sitting in a “pending” state in their account.

ACH is the only digital rent collection method with fees low enough to avoid passing them on to tenants. 

Guaranteed rent payments

A2A payments providers like Aeropay allow landlords to enable guaranteed ACH for rent payments, effectively shouldering the risk of returned payment, and guaranteeing funds will be delivered.

Guaranteed ACH means rent payments are delivered on time, every time — with no merchant risk of returned or unprocessed payments. 

Takeaway: The best payment option for property managers is unlocked using account-to-account payments for guaranteed ACH. 

ACH rent payment insight: ACH vs. Guaranteed ACH

A key difference between traditional ACH and A2A payments is the ability to offer guaranteed ACH. 

Guaranteed ACH means the payment provider shoulders the risk of returned payment by guaranteeing funds will be delivered to the merchant. 

ACH payments can be prone to returns due to reasons like

• Insufficient funds
• Account closed
• Stop payment
• Buyer’s remorse

For landlords, guaranteed ACH payments are highly beneficial because they eliminate the risk of these returns — ensuring  rent payments are delivered on time, every month — and eliminating late payments. 

However, it’s important to note: Some guaranteed ACH providers implement additional verification steps and criteria to fulfill their “guarantee” — this filters out legitimate transactions and deters potential customers.

In fact, guaranteed ACH payments have an average acceptance rate of only 60-70%.

Luckily, A2A providers like Aeropay take a unique approach to account-to-account payments that ensures businesses capture the highest revenue possible. 

Instead of simply “guaranteeing” certain ACH transactions, Aeropay takes a balanced approach to mitigate returns, maximize acceptance rates, and ensure sufficient funds.  

The result: 95% of Aeropay transactions are approved, allowing for more players and higher rates of customer satisfaction.

Click here to learn more about Aeropay’s guaranteed ACH payments for rent collection.