Philipp Postrehovsky is the co-founder and COO of RentMoola, which enables renters to pay by credit card.
Photograph by: Ric Ernst , VANCOUVER SUN
A new Vancouver start-up promises to modernize one of the last bastions of cash and cheque transactions by introducing credit card payments to the rental market.
RentMoola claims to be the first online service in Canada that enables renters to collect rewards and points by paying with plastic. The service allows for one-time or routine payments to be made through a registered credit card online or on mobile devices.
The company charges the renter a 2.75-per-cent fee for each payment, which, it argues, is offset by Air Miles and other rewards collected by the consumer.
But Scott Hannah, president of the non-profit Credit Counselling Society, warns there’s a cost to the convenience and renters should beware.
Relying on credit to pay for life necessities such as rent is dangerous financial practice, he said. Plus, RentMoola’s claim that credit card kickbacks will offset its fee is unlikely to hold true for most renters.
“Looking at the best reward points where you might get maybe two per cent (back), it’s unlikely that it’s going to work in your favour,” he said.
Paying rent by credit card is typically not an option because landlords aren’t willing to pay processing fees to credit companies. By law, they can’t pass these extra costs on to tenants.
However, RentMoola acts as a third-party service provider by courting property management companies with zero fees.
Philipp Postrehovsky, RentMoola’s COO and co-founder, said the company fills a need for both landlords and renters by removing administrative and personnel costs around processing cheque or cash payments and providing a financial buffer for months when renters fall short.
“There’s not too many industries left where cheques are still accepted,” points out Postrehovsky.
Condo owners can even pay their monthly strata fees using RentMoola.
The company launched publicly in April and now has seven Vancouver property management companies on its roster, including Advent Real Estate, Orr Development and Unique Accommodations, which account for hundreds of rental units in Metro Vancouver.
RentMoola is also making inroads in Toronto, signing up an average of two property companies per week and in commercial rental markets in Texas, Postrehovsky said.
For now, the company is only working with registered property management companies in Vancouver — not homeowners renting a spare suite — and is targeting the high-end rental market of working professionals and foreign renters who don’t want the hassle of establishing a foreign bank account or the expense of wire transfers.
Postrehovsky credits his brother Patrick, co-founder and CEO, with coming up with the idea to revolutionize rental payments while living in Shanghai, China.
“In Shanghai, expats can only rent and everyone pays by cash so he would have to go to the ATM multiple times a week to amass the amount of money to pay for his rent, because there’s caps on how much you can take out,” he said.
Eventually, Patrick discovered the most convenient way to get the cash in one go was to purchase foreign currency on his credit card — with the added perk of gathering points.
“He ended up earning four free flights because he was able to leverage his rewards program on his Aerogold credit card.”
Upon returning to Canada, Patrick was shocked to find people still paying rent predominately by cheque and set about finding a way to simplify the payment process and provide a channel to accumulate more rewards, his brother said.
“And so RentMoola was born.”
It all sounds appealing, but renters should use extreme caution, said Hannah of the Credit Counselling Society. With credit card interest rates averaging around 20 per cent, it wouldn’t take long for a few months’ rent to transform into a rather hefty personal debt.
Also, consumers need to take into account that gift cards and points come with limitations and there’s no guarantee consumers will actually get to use all their points. “Every year people lose millions and millions of reward points because they expire.”
Postrehovsky said RentMoola is cognizant that paying rent by credit can be a perilous pursuit for some renters, which is why it has targeted the high end of the industry and courted companies that are “aligned with our vision.”
Still, Hannah isn’t convinced RentMoola’s promised payout is enough to offset the expense, even for renters diligent about paying their credit card balance each month.
“Is the convenience worth the cost? I think the jury’s still out on that.”