Coupon Books for HOA Dues Payments

DavidW5 (North Carolina)
Posts: 565

Posted:

Our management contract includes a "Schedule B" listing the cost of non-routine services. One item on the schedule is the printing of coupon books for monthly dues payments. The association is charged $5 per coupon book. Our management company has a direct debit process whereby a homeowner can sign up to have the dues automatically debited from their bank account each month. The management company also accepts payments via homeowner initiated online banking and via credit card. However, the management company insists that it will print and mail coupon books to all homeowners who are not signed up for direct debit. For the coming year we just received a bill for $2485 for printing 497 coupon books (out of 801 total homes in the HOA).

I contacted the management company and asked them to provide me with the number of coupons they actually receive with mailed payments for a recent month. They answered that they were unable to obtain that number from the lockbox bank they use to process the payments. They further stated that their policy is to send coupon books to all homes not enrolled in direct debit.

I suspect that the percentage of owners actually using the coupons is quite small. Many of the 497 not enrolled in direct debit probably utilize electronic payments via their online bank account, or credit card payment and therefore the coupons are not needed. The information on the coupons (amount due, where payments are to be sent, etc.) could be provided in a simple letter.

Years ago, when snail mail was the only way to send a payment, the coupon books were necessary. Now they are largely an anachronism. I want to push our management company to alter their procedures which would probably save us close to $2,000 a year.

How many of you use coupon books for payment of HOA fees? Do you send the coupon books to all HOA members? Do you pay for each coupon book? What other payment methods do you permit?

Thanks for your feedback.

Dave (HOA Treasurer)

TimB4 (Tennessee)
Posts: 21,059

Posted:

David,

We use payment books as well. We send them to all members along with the notice of assessments. The payment books are used in place sending invoices each month.

For 150 payment books, it cost us under $300 at staples to have them made and that included printing the Assessment notice.

We do not use direct debit or offer credit card payments. However, we do encourage, and have about 30% of members, use their financial institutions bill pay service. There are another 18% that pay the years assessment in full (vs. monthly).

We did adjust the physical size of the payment book and now get 5 of them per 8.5 x 11 sheet of paper (vs. 4 per page we had been getting). This did save us some funds.

Granted, being self managed, we do stuff, label and mail the envelopes ourselves. That does take some time. I can only imagine it taking a full day or two for one person doing that for your size of an Association. However, we still prefer to use coupon books and it appears the members like them as well.

Tim

AllisonD (Florida)
Posts: 449

Posted:

I think coupons are useless, nonetheless, for the very few users who refuse to pay dues unless they have a coupon, I have made my own. I would be happy to send them to you. They are 4 to a sheet (they must use scissors and cut them). I make copies myself, the coupons will be mailed with the 2014 budget next week.

AllisonD (Florida)
Posts: 449

Posted:

I think coupons are useless, nonetheless, for the very few users who refuse to pay dues unless they have a coupon, I have made my own. I would be happy to send them to you. They are 4 to a sheet (they must use scissors and cut them). I make copies myself, the coupons will be mailed with the 2014 budget next week.

Also, if you have all your residents on a spreadsheet you can easily send letters, make labels etc, using mail merge in MS Word.

AllisonD (Florida)
Posts: 449

Posted:

I think coupons are useless, nonetheless, for the very few users who refuse to pay dues unless they have a coupon, I have made my own. I would be happy to send them to you. They are 4 to a sheet (they must use scissors and cut them). I make copies myself, the coupons will be mailed with the 2014 budget next week.

Also, if you have all your residents on a spreadsheet you can easily send letters, make labels etc, using mail merge in MS Word.

AllisonD (Florida)
Posts: 449

Posted:

My computer appears to be on crack.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

We never used coupons. It is just known and posted the payment schedule. It is in our documents as well. You could make auto arrangements to help otherwise we had the payment box next to the mailboxes. We also had a 6 month we liened policy unless made payment arrangements. Your legally obligated to pay the dues if or if not you get a notice like a coupon book.

I find coupon books kind of redundant. A good policy and acknowledgement your in a HOA should suffice. A coupon and mailing just adds expenses to the budget. Mail and supplies cost money. Avoiding those costs can add up in savings and the ability to refocus funds.

Former HOA President

GlenL (Ohio)
Posts: 5,491

Posted:

$5.00 per coupon book seems a reasonable cost when all of the materials, time & postage are factored in. It is part of the cost of doing business and while I'm sure that the MC doesn't loose money, I doubt it is a cash cow for them. Since banks typically charge to process credit cards do you charge the homeowners who pay by cc more ore do you charge it off as a cost?

While I applaud your efforts to keep costs down, I think when all is said and done it will cost you more in the long run, trying to save $5.00 here and there.

Studies show that 5 out of 4 people have problems with fractions

SheliaH (Indiana)
Posts: 6,964

Posted:

We use payment coupons, but homeowners can also pay via automatic deduction of their bank account or online. If you choose automatic deduction or pay online, you don’t get a payment coupon book. A few years ago, we asked the property manager to print the coupons on sheets instead of in a book to save printing costs.

I don’t know why your property manager can’t give you the number of coupons – part of our monthly financial reports lists the number of payments received in the lockbox by the day (can’t remember what that report is called) and that information comes from the bank. Perhaps your board needs to tell the property manager to either find a way to get that information or look for a lockbox bank that will provide it upon request.

Your question about the number of people using coupons is interesting. I’m also treasurer of my association (until next month when I leave the Board!) and I think I’ll ask our property manager the same thing.
I’d love to encourage our homeowners to pay online, but the management company charges a $2.95 service charge, which I think is excessive. I’ve already asked our property manager to see if there’s a way to eliminate the service charge (I’d rather it be rolled up in our monthly bank charges if we have to pay something).

(On a side note, I’ve never understood why I have to pay extra when paying my BILLS. By paying online the creditor gets the money faster, so why should I have to pay for the privilege??? And automatic deductions make me nervous, but that’s just my personal quirk)

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

You are overthinking the idea of a coupon "book" We simply mail out two sheets of paper with 6 coupons each. (12 months) It doesn't need to be a book at all, nor stapled, nor cut.

Just print 6 of these per page. (sample)
Google

And owners can cut it with scissors themselves. If you have 900 units, thats 2 reams of paper at $5 each, so $10 to make coupon books for everyone. If you had a group of 5 people volunteer, you could fold them and stuff them in envelopes very quickly or hire an office supply store like staples to fold. Mail merge will print all the labels for you and 18 sheets of labels at labels at 50 per sheet and you can have them addressed very quickly.

It doesnt need to be expensive if you think outside the "box"

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

I’d love to encourage our homeowners to pay online, but the management company charges a $2.95 service charge, which I think is excessive. I’ve already asked our property manager to see if there’s a way to eliminate the service charge (I’d rather it be rolled up in our monthly bank charges if we have to pay something).

It really cant be eliminated. Visa/Mastercard charge a fee to run the card. So if your dues are $100 and visa takes $3, you just underpaid your dues by $3. So to make sure everyone pays the same amount, legally, the service fee is added. Its more of a legal problem than a service charge problem.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By SteveM9 on 12/18/2013 7:58 AM

It really cant be eliminated. Visa/Mastercard charge a fee to run the card. So if your dues are $100 and visa takes $3, you just underpaid your dues by $3. So to make sure everyone pays the same amount, legally, the service fee is added. Its more of a legal problem than a service charge problem.

My own association has a similar charge so I always use my bank's bill pay service. The problem with that is you gotta have the cash to cover the check.

For some reason most of us (including myself) are reluctant to pay an extra $3 fee for using a credit card but would not have a problem paying $103 if that was the assessment amount. So I would suggest doing one of the following:

1) Roll the credit card fees into the assessment and charge a higher fee; or
2) Follow the lead of the big boys and accept the fees as a just another cost of doing business.

Anything you do to make paying easier makes it more likely that you will get paid. It also makes it more likely that your delinquencies will drop. Personally, I would rather receive 97% of what I am owed instead of 100% of nothing.

BTW, I am unaware of any laws that require an association to impose credit card fees only on those who use them.

One final thought: If I pay by credit card, my payment eventually makes its way directly into the association's bank account without any further effort by the association. If I use my bill pay or write a check, someone has to manually remove it from the mailbox, open the envelope, manually record the transaction, maybe make a copy of the check, fill out a deposit slip, and then transport the check to deposit it into the bank account. Why is it that the automated payment has a fee while the labor-intensive manual system charges no fees at all? Seems like it should be the other way around.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By SheliaH on 12/18/2013 6:59 AM

And automatic deductions make me nervous, but that’s just my personal quirk

A banker once told me that everyone, including the banks, hate automatic deductions.

My own experience has been that the deduction will eventually occur at the worst possible moment, usually a few days before payday and after I have already drained the account dry because I forgot about the automatic deduction. All other forms of payment allow you to exercise some control over the timing of the payment.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By LarryB13 on 12/18/2013 11:22 AM
I would suggest doing one of the following:

1) Roll the credit card fees into the assessment and charge a higher fee; or
2) Follow the lead of the big boys and accept the fees as a just another cost of doing business.

But isn't #2 the same as #1?

If the association's costs increase by the amount of a credit card fee, then you need to increase your assessments by that amount to balance the budget: income - expenses = 0

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By BruceF1 on 12/18/2013 1:24 PM
But isn't #2 the same as #1?

Not necessarily. #1 assumes that all members will generate the extra expense by using credit cards necessitating across-the-board fee increases. #2 recognizes that fewer than all members will generate the fees and that the budget is flexible enough to absorb those fees.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By LarryB13 on 12/18/2013 3:01 PM

Posted By BruceF1 on 12/18/2013 1:24 PM
But isn't #2 the same as #1?

Not necessarily. #1 assumes that all members will generate the extra expense by using credit cards necessitating across-the-board fee increases. #2 recognizes that fewer than all members will generate the fees and that the budget is flexible enough to absorb those fees.

Then the third alternative would be to estimate how much the credit card fees would cost the association each year and increase the assessments by that amount divided by all the homeowners. With that approach homeowners who don't use credit cards would be paying a portion of the cost for others using their credit cards whereas with #1 homeowners who don't use credit cards are paying an even higher cost because of those who do use credit cards. Also, with the third approach the cost becomes a budgeted line item instead of being "hidden" in some line item called "miscellaneous" or some other name. The difference between #2 and #3 in how you plan your budget and how visible you want that expense to be.

AllisonD (Florida)
Posts: 449

Posted:

I believe that banks can charge the fees directly to the person paying at the time they pay, so only those who pay via credit card pay the fees.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By AllisonD on 12/19/2013 4:21 PM
I believe that banks can charge the fees directly to the person paying at the time they pay, so only those who pay via credit card pay the fees.

To be able to accept payment by credit cards you must have a merchant account. The fees being referred to are charged to the merchant account and cannot be passed on to the consumer by the merchant bank. The consumer deals with the bank that issued the card, not the merchant bank. As a former business owner I am very familiar with how that works.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Bruce,

I understand what you are saying. However, I have paid my Daughters tuition where they charged a "convenience fee" if I paid by credit card. This fee, surprisingly, equaled the merchant account fees.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By TimB4 on 12/20/2013 5:47 AM
Bruce,

I understand what you are saying. However, I have paid my Daughters tuition where they charged a "convenience fee" if I paid by credit card. This fee, surprisingly, equaled the merchant account fees.

Yes, but you were charged that fee by the educational institution, not by the bank that issued the card, and certainly not by the merchant bank (the bank that processes the educational institution's credit card payments).

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BruceF1 on 12/20/2013 6:38 AM

Posted By TimB4 on 12/20/2013 5:47 AM
Bruce,

I understand what you are saying. However, I have paid my Daughters tuition where they charged a "convenience fee" if I paid by credit card. This fee, surprisingly, equaled the merchant account fees.

Yes, but you were charged that fee by the educational institution, not by the bank that issued the card, and certainly not by the merchant bank (the bank that processes the educational institution's credit card payments).

And by the way, that "convenience fee" is not tax deductible.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Good to know.

Thanks Bruce.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

And by the way, that "convenience fee" is not tax deductible.

So $3 month ($36 annually) would be taken off taxable income. Its possible, but unlikely that $36 will push many people into a higher tax bracket.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By SteveM9 on 12/20/2013 8:14 AM

And by the way, that "convenience fee" is not tax deductible.

So $3 month ($36 annually) would be taken off taxable income. Its possible, but unlikely that $36 will push many people into a higher tax bracket.

You have it backwards (you left out the word "not") and I think you also have things mixed.

The "convenience fee" that Tim and I referred to is the fee Tim paid to the educational institution for using his credit card to pay his daughter's tuition. Some fees paid to an educational institution might be tax deductible because they are related to some course of education. A fee for the use of the credit card is not so related and is not tax deductible.

The $3 is the fee that the OP's association is paying for the processing of credit card payments. That also is not tax deductible, but then again, association dues or fees are not tax deductible either unless it happens to be rental property.

If the association charges the owner the $3 as a "convenience fee" for the use of a credit card (which they could do as long as it's separately stated), then that's taxable income to the association. But then again, the association can deduct from their taxable income any expenses associated with that income and if it happens that the credit card processing fee is also $3 then it's $3-$3=$0 as the net taxable income.

AllisonD (Florida)
Posts: 449

Posted:

Quote:

Posted By BruceF1 on 12/20/2013 6:45 AM

Posted By BruceF1 on 12/20/2013 6:38 AM

Posted By TimB4 on 12/20/2013 5:47 AM
Bruce,

I understand what you are saying. However, I have paid my Daughters tuition where they charged a "convenience fee" if I paid by credit card. This fee, surprisingly, equaled the merchant account fees.

Yes, but you were charged that fee by the educational institution, not by the bank that issued the card, and certainly not by the merchant bank (the bank that processes the educational institution's credit card payments).

And by the way, that "convenience fee" is not tax deductible.

That is not true, the convenience fee is the school passing on the credit card charge to you. Government agencies are typically not allowed to charge more than the service they are providing. I run a county department that takes in money and credit card charges are charged directly to the person paying. Their charge will appear to be a bit more than the service they are paying for, but the charge has nothing to do with my department; the programmer was able to pass the credit card fee through to the final balance, and it shows up that way in our computer system for folks paying online. Schools like to call it a 'convenience fee'.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By AllisonD on 12/20/2013 6:35 PM
That is not true, the convenience fee is the school passing on the credit card charge to you.

Exactly what I said.

AllisonD (Florida)
Posts: 449

Posted:

just so we are clear, its not the school paying the bank fee and then incorporating the fee into the entire fee. The school does not care about the bank fees and has nothing to do with it. The credit card software program which is sometimes integrated into the school website or sometimes sends you to an independent website, collects the tuition and sends that to the school, and collects the bank fee and sends that to the bank. Its a small but important distinction.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By AllisonD on 12/21/2013 5:08 AM
just so we are clear, its not the school paying the bank fee and then incorporating the fee into the entire fee. The school does not care about the bank fees and has nothing to do with it. The credit card software program which is sometimes integrated into the school website or sometimes sends you to an independent website, collects the tuition and sends that to the school, and collects the bank fee and sends that to the bank. Its a small but important distinction.

The point is this. It's the person (or company, or whatever) that submits the credit card information to the merchant bank that is charging the fee. It doesn't matter whether it's the school itself or a third-party payment processor. Here's how it works:

1. Person supplies credit card information to pay the bill.
2. The "person" (which could be software) submitting the credit card information to the merchant bank to receive payment knows what percentage will be charged by the merchant bank for processing the payment and adds that amount to the bill amount when submitting the card information to the merchant bank for payment.
3. The merchant bank deposits the total (bill amount plus the added fee) into the merchant account.
4. If the school is the holder of the merchant account, the school will be charged the card processing fee. But, in that case the school will have already been reimbursed for the fee in step 3.
5. If the school uses a third-party processor and the third-party processor is the owner of the merchant account then the third-party processor will be charged the card processing fee but will have been reimbursed that amount in step 3. The third-party processor then deposits only the bill amount into the school's account.

If a third-party processor is used, they don't work for free, either. They will charge the school a fee for their work which may also be added to the total the consumer pays (step 2).

The fact that all this may be done by software is irrelevant. The software only hides what is really going on because it does everything for you without human intervention or awareness. All you see is the end result.

Best choice: Pay the school in cash or by check.

And, if you're going to put the tuition on a credit card and make payments, you're better off with an educational loan. Not only is the interest rate lower, but the interest on an educational loan is tax deductible whereas the interest on a credit card is not.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Visa and Mastercard became popular in the early 1970's. State and local governments in Arizona were highly reluctant to accept credit card payments until popular demand required it. For several years they used to add a fee for the use of a card but those fees disappeared decades ago. Not only do government agencies accept credit cards, they actively encourage their use with online payments. ADOT has run TV ads for at least a decade to encourage motorists to renew licenses and pay fees online. Most recently, my county assessor has run TV ads to encourage taxpayers to pay online.

What led to this turnaround? I suspect that the government was able to negotiate lower processing fees (they are negotiable). I also suspect that the use of cards virtually eliminated NSF's and cut the amount of labor required to deposit funds paid in person. The benefits of accepting cards outweighed the costs of doing so.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By LarryB13 on 12/21/2013 12:59 PM
Visa and Mastercard became popular in the early 1970's. State and local governments in Arizona were highly reluctant to accept credit card payments until popular demand required it. For several years they used to add a fee for the use of a card but those fees disappeared decades ago. Not only do government agencies accept credit cards, they actively encourage their use with online payments. ADOT has run TV ads for at least a decade to encourage motorists to renew licenses and pay fees online. Most recently, my county assessor has run TV ads to encourage taxpayers to pay online.

What led to this turnaround? I suspect that the government was able to negotiate lower processing fees (they are negotiable). I also suspect that the use of cards virtually eliminated NSF's and cut the amount of labor required to deposit funds paid in person. The benefits of accepting cards outweighed the costs of doing so.

Most likely that is true. Also, with some commercial accounts, banks charge a processing fee for each deposit item, meaning a fee for each check that is deposited.

For the merchant the cards are pretty good, too. When you swipe the card you know immediately if the card is good and if there is enough credit to pay for the goods. Also, that money can't be stolen if there is a robbery. Once the card is swiped that amount is set aside for you until you until the merchant "batches" the credit card sales for the day.

AllisonD (Florida)
Posts: 449

Posted:

Quote:

Posted By BruceF1 on 12/21/2013 5:48 AM

Posted By AllisonD on 12/21/2013 5:08 AM
just so we are clear, its not the school paying the bank fee and then incorporating the fee into the entire fee. The school does not care about the bank fees and has nothing to do with it. The credit card software program which is sometimes integrated into the school website or sometimes sends you to an independent website, collects the tuition and sends that to the school, and collects the bank fee and sends that to the bank. Its a small but important distinction.

The point is this. It's the person (or company, or whatever) that submits the credit card information to the merchant bank that is charging the fee. It doesn't matter whether it's the school itself or a third-party payment processor. Here's how it works:

1. Person supplies credit card information to pay the bill.
2. The "person" (which could be software) submitting the credit card information to the merchant bank to receive payment knows what percentage will be charged by the merchant bank for processing the payment and adds that amount to the bill amount when submitting the card information to the merchant bank for payment.
3. The merchant bank deposits the total (bill amount plus the added fee) into the merchant account.
4. If the school is the holder of the merchant account, the school will be charged the card processing fee. But, in that case the school will have already been reimbursed for the fee in step 3.
5. If the school uses a third-party processor and the third-party processor is the owner of the merchant account then the third-party processor will be charged the card processing fee but will have been reimbursed that amount in step 3. The third-party processor then deposits only the bill amount into the school's account.

If a third-party processor is used, they don't work for free, either. They will charge the school a fee for their work which may also be added to the total the consumer pays (step 2).

The fact that all this may be done by software is irrelevant. The software only hides what is really going on because it does everything for you without human intervention or awareness. All you see is the end result.

Best choice: Pay the school in cash or by check.

And, if you're going to put the tuition on a credit card and make payments, you're better off with an educational loan. Not only is the interest rate lower, but the interest on an educational loan is tax deductible whereas the interest on a credit card is not.

The difference with regards to our discussion is that the HOA should not have to budget for the credit card fees if only the credit card holder is paying the fees. There are apps you can get with an IPhone that will run credit cards for a % fee of the transaction, and it does not cost the association at all, just the card holder.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By AllisonD on 12/21/2013 1:48 PM
The difference with regards to our discussion is that the HOA should not have to budget for the credit card fees if only the credit card holder is paying the fees. There are apps you can get with an IPhone that will run credit cards for a % fee of the transaction, and it does not cost the association at all, just the card holder.

All the IPhone apps I'm aware of charge the merchant, not the card holder.

I used to have a merchant account. I know how they work. I also prepare taxes for clients who are merchants and I see their merchant account statements and the associated transaction fees, which they can deduct from their business income.

How many merchant accounts have you had? How many merchant account agreements have you read? If the card holder is to be charged the transaction fee, the merchant has to be the one to do it, whether by a human adding the charge or by doing it automatically by some software. By "merchant" I mean a business (like a retail store), a municipality, an educational institution, or any other enterprise that accepts credit cards for payment.

Google IPhone apps for processing credit cards. They all state various transaction fees (a percentage for each swipe). If this fee is going to automatically be passed on to the consumer instead of the merchant, then why does the merchant even care what the fee is since he/she will never see it?

AllisonD (Florida)
Posts: 449

Posted:

You care about the fee because you want to provide the lowest costs to your customers or residents. Now I am not saying the HOA has to use the IPhone app, but there are ways to not have the HOA pay the merchant fees and pass them through to the homeowner.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Allison,

Here's another way you can see for yourself what I am trying to say:

I assume you have a credit card. Look up your credit card agreement and read it. By law, the credit card issuer has to state in that agreement every fee they can charge you and how much that fee is or how it's calculated. They may charge a late fee, a balance transfer fee, or whatever. If your credit card agreement doesn't state that your card issuer can charge you a fee when you use your card, then they can't do it. Period. In order to be charged a convenience fee, transaction fee, processing fee, or whatever you choose to call it, it has to be stated in your credit card agreement. If it's not in your credit card agreement, the bank (card issuer) cannot charge you that fee and neither can the merchant bank because both banks are regulated by the Credit Card Act of 2009. Only the "merchant" (retail business, municipality, etc.) can charge you that fee by adding it to the amount you owe for the goods or services when they submit your card for payment. The "merchants" are not bound by the Credit Card Act.

AllisonD (Florida)
Posts: 449

Posted:

Those rules pertain to your own credit card, which you know about in advance. But when you purchase services from someone like a store, the store incurs merchant service charges from their credit card processor which for the most part, businesses incorporate into their general service fees. But in this case, the merchant fees can be charged directly to the homeowner, without involving the HOA. And it has nothing to do with the homeowner's own credit card.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Huh??? A HOA is ONLY funded by its members for its members. How is this cost NOT being effected by the HOA and the homeowner??? Either the homeowner pays the fee directly to use the credit card option or ALL the owners pay a portion of that fee through their dues.

Former HOA President

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By MelissaP1 on 12/21/2013 8:17 PM

Either the homeowner pays the fee directly to use the credit card option or ALL the owners pay a portion of that fee through their dues.

Isn't that what they are already doing with the $5.00 coupon books? The cost is passed on to all owners even though the management company can produce no evidence that even a single owner is using them.

JoK2 (California)
Posts: 198

Posted:

Quote:

Posted By AllisonD on 12/21/2013 1:48 PM

Posted By BruceF1 on 12/21/2013 5:48 AM

Posted By AllisonD on 12/21/2013 5:08 AM
just so we are clear, its not the school paying the bank fee and then incorporating the fee into the entire fee. The school does not care about the bank fees and has nothing to do with it. The credit card software program which is sometimes integrated into the school website or sometimes sends you to an independent website, collects the tuition and sends that to the school, and collects the bank fee and sends that to the bank. Its a small but important distinction.

The point is this. It's the person (or company, or whatever) that submits the credit card information to the merchant bank that is charging the fee. It doesn't matter whether it's the school itself or a third-party payment processor. Here's how it works:

1. Person supplies credit card information to pay the bill.
2. The "person" (which could be software) submitting the credit card information to the merchant bank to receive payment knows what percentage will be charged by the merchant bank for processing the payment and adds that amount to the bill amount when submitting the card information to the merchant bank for payment.
3. The merchant bank deposits the total (bill amount plus the added fee) into the merchant account.
4. If the school is the holder of the merchant account, the school will be charged the card processing fee. But, in that case the school will have already been reimbursed for the fee in step 3.
5. If the school uses a third-party processor and the third-party processor is the owner of the merchant account then the third-party processor will be charged the card processing fee but will have been reimbursed that amount in step 3. The third-party processor then deposits only the bill amount into the school's account.

If a third-party processor is used, they don't work for free, either. They will charge the school a fee for their work which may also be added to the total the consumer pays (step 2).

The fact that all this may be done by software is irrelevant. The software only hides what is really going on because it does everything for you without human intervention or awareness. All you see is the end result.

Best choice: Pay the school in cash or by check.

And, if you're going to put the tuition on a credit card and make payments, you're better off with an educational loan. Not only is the interest rate lower, but the interest on an educational loan is tax deductible whereas the interest on a credit card is not.

The difference with regards to our discussion is that the HOA should not have to budget for the credit card fees if only the credit card holder is paying the fees. There are apps you can get with an IPhone that will run credit cards for a % fee of the transaction, and it does not cost the association at all, just the card holder.

Please let us know what company is processing CC's without a transaction fee.

JoK2 (California)
Posts: 198

Posted:

Sorry, I got excited when someone mentioned 0% on CC transactions. That just can't be possible in today's world. Someone, somewhere is getting a piece of that transaction process. As a merchant the fee's are considered a cost of doing business, and that cost is built into the service fees.

In the case of an HOA and assessments you can discuss it all day long, however, in the end, any charges the mgmt. company incurs are eventually passed on to all homeowners aren't they? It doesn't seem fair that I would have to pay any of those incurred expenses if I prefer to pay with a check or other free method of payment.

Just to add to the information, depending on the credit card used, there are tiers of different charges, for instance all of those CC's that have rewards attached to them cost the merchant a higher % than a regular credit card.

AllisonD (Florida)
Posts: 449

Posted:

Quote:

Posted By JoK2 on 12/22/2013 3:46 AM

Posted By AllisonD on 12/21/2013 1:48 PM

Posted By BruceF1 on 12/21/2013 5:48 AM

Posted By AllisonD on 12/21/2013 5:08 AM
just so we are clear, its not the school paying the bank fee and then incorporating the fee into the entire fee. The school does not care about the bank fees and has nothing to do with it. The credit card software program which is sometimes integrated into the school website or sometimes sends you to an independent website, collects the tuition and sends that to the school, and collects the bank fee and sends that to the bank. Its a small but important distinction.

The point is this. It's the person (or company, or whatever) that submits the credit card information to the merchant bank that is charging the fee. It doesn't matter whether it's the school itself or a third-party payment processor. Here's how it works:

1. Person supplies credit card information to pay the bill.
2. The "person" (which could be software) submitting the credit card information to the merchant bank to receive payment knows what percentage will be charged by the merchant bank for processing the payment and adds that amount to the bill amount when submitting the card information to the merchant bank for payment.
3. The merchant bank deposits the total (bill amount plus the added fee) into the merchant account.
4. If the school is the holder of the merchant account, the school will be charged the card processing fee. But, in that case the school will have already been reimbursed for the fee in step 3.
5. If the school uses a third-party processor and the third-party processor is the owner of the merchant account then the third-party processor will be charged the card processing fee but will have been reimbursed that amount in step 3. The third-party processor then deposits only the bill amount into the school's account.

If a third-party processor is used, they don't work for free, either. They will charge the school a fee for their work which may also be added to the total the consumer pays (step 2).

The fact that all this may be done by software is irrelevant. The software only hides what is really going on because it does everything for you without human intervention or awareness. All you see is the end result.

Best choice: Pay the school in cash or by check.

And, if you're going to put the tuition on a credit card and make payments, you're better off with an educational loan. Not only is the interest rate lower, but the interest on an educational loan is tax deductible whereas the interest on a credit card is not.

The difference with regards to our discussion is that the HOA should not have to budget for the credit card fees if only the credit card holder is paying the fees. There are apps you can get with an IPhone that will run credit cards for a % fee of the transaction, and it does not cost the association at all, just the card holder.

Please let us know what company is processing CC's without a transaction fee.

I use this bank http://www.gsbb.com/ and there is a transaction fee, but the association does not pay it, the resident pays it. There is always a transaction fee but for this discussion, we are talking about passing the fee on to the resident so that the association does not have to pay it. All the residents should not have to pay for merchant account fees for the few who pay via credit card. Here is a link to PayPal, which I do not use but shows that there is a per transaction fee but no merchant fees available on one of their options (trying not to violate any forum rules). So what the resident pays is their monthly or quarterly dues and then a fee for using their credit card. There will always be a fee for using a credit card, but our goal is to not have to budget all residents' money to pay for it.

AllisonD (Florida)
Posts: 449

Posted:

https://www.paypal.com/us/webapps/mpp/merchant-fees I forgot the link in the previous message, sorry!

AnnH5 (Florida)
Posts: 304

Posted:

I just scanned quickly through this but my take is this- what does the end user need and want? The homeowner is the end user of this process because they are the people who need to make the payment. If you have a community with many elderly people who are not tech savvy and who are not going to utilize an online payment system, then the coupons are probably still going to be needed for those people.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By AllisonD on 12/22/2013 7:37 AM
https://www.paypal.com/us/webapps/mpp/merchant-fees I forgot the link in the previous message, sorry!

The quotation below is from the website whose link you posted. Scroll to the bottom and click on the link under FAQs that reads: "Will my customers pay any fees?"

"PayPal is free whenever you use it to buy something or make a payment in the US. The seller pays us a small fee to securely handle your payment. As a buyer, you never pay a fee to use PayPal."

This statement clearly states that the fee is not charged to the person who uses PayPal for payment. It is charged to the "merchant" that uses PayPal to accept payment.

By the way, sell too much using PayPal and make over 200 transactions and you'll get a 1099-K and so will the IRS. That happened to one of our clients last year.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

By the way, sell too much using PayPal and make over 200 transactions and you'll get a 1099-K and so will the IRS. That happened to one of our clients last year.

Not a big deal if you correctly report all your income correctly anyway. Big surprise if you were not.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Its really pretty simple.....

Convenience Fee Scenario
---------------------
Owner pays Dues $100
Owner pays Convenience Fee $2
HOA owes bank fee of $2
HOA total received = $100

No Convenience Fee Scenario
---------------------
Owner pays Dues $100
HOA owes bank fee of $2
HOA total received = $98

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By SteveM9 on 12/23/2013 10:15 AM

By the way, sell too much using PayPal and make over 200 transactions and you'll get a 1099-K and so will the IRS. That happened to one of our clients last year.

Not a big deal if you correctly report all your income correctly anyway. Big surprise if you were not.

It's not really a big deal for most people anyway. The threshold for a 1099-K is $20,000 in credit card (or PayPal) sales AND more than 200 transactions for the year. That's a pretty high threshold for most people who only have casual sales during the year.

The client who came to us thought that the IRS was going to tax all his 1099-K income. It turned out he got rid of a lot of junk that was in his basement that year. Truth is, you subtract from that income what it cost you to produce that income. Most people tend to sell unwanted used items on the internet that they paid more for to begin with, so no tax will be due. The 1099-K is intended to force business owners to be more careful with the income and expenses they report.

AllisonD (Florida)
Posts: 449

Posted:

Quote:

Posted By SteveM9 on 12/23/2013 10:20 AM
Its really pretty simple.....

Convenience Fee Scenario
---------------------
Owner pays Dues $100
Owner pays Convenience Fee $2
HOA owes bank fee of $2
HOA total received = $100

No Convenience Fee Scenario
---------------------
Owner pays Dues $100
HOA owes bank fee of $2
HOA total received = $98

Thank you SteveM9, this is exactly what I was trying to illustrate. I have a family business and we take credit cards from our customers. We do not mention the merchant fees to them, its simply incorporated into our price structure. HOA finances are a bit different, all the residents see the yearly budget and know what is being paid for with their dues. You can create an expense for merchant fees and let the entire resident population pay for it, or you can pass the per transaction fee to the homeowners who use credit cards, as a convenience fee.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By AllisonD on 12/24/2013 5:27 AM

HOA finances are a bit different, all the residents see the yearly budget and know what is being paid for with their dues. You can create an expense for merchant fees and let the entire resident population pay for it, or you can pass the per transaction fee to the homeowners who use credit cards, as a convenience fee.

One of the problems with this is that the costs of processing checks are not itemized. The management company does not disclose the actual cost to the HOA so it all goes under the line item for management fees. This makes it impossible to determine the true cost of check processing because it is hidden from view.

I have owned my own businesses and managed others where we took checks and credit cards. Checks are a royal pain in the ass even when they are not NSF. Even just a handful of checks a day will require about one man-hour of labor to process and deposit. For most businesses these days that's anywhere from $50 to $100. No one notices that cost because the employees are there anyway and must not have anything better to do, right?

AngelaC4 (Florida)
Posts: 1

Posted:

Great Idea! A simple solution that works!

LynneM (Massachusetts)
Posts: 52

Posted:

Allison, could you send me a copy of the coupons you use. Thank you Lynne M