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Can a landlord charge a fee when a tenant pays rent with a credit card?

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07/26/2016 | Author: TAR Legal Staff

Texas law prohibits a seller or merchant from adding a surcharge when you purchase goods or services using a credit or debit card instead of a check or cash (or other similar means of payment). However, it was unclear how the law applies to a landlord using a third-party payment processor to collect online rent payments, so Texas Attorney General Ken Paxton was asked to issue an opinion on the topic.

The opinion stems from the two statutory provisions (Texas Finance Code §339.001(a) and Texas Business and Commerce Code §604A.002(a)) that prohibit credit- and debit-card surcharges and a Texas Office of Consumer Credit Commissioner advisory bulletin related to those statutory provisions. The opinion makes several key points:

  • A court is likely to conclude that a fee uniformly charged to all online means of payment by an arms-length third-party vendor does not violate the credit card and debit card surcharge prohibitions.
  • Whether a relationship between a seller and a third-party vendor rises to a problematic level is a question of fact that cannot be addressed in an attorney general opinion.
  • Whether a service fee for online payments is permitted and is not considered a surcharge, depends on the following analysis:
    • If a third-party vendor is separate from the landlord and uniformly charges a fee to customers for all means of electronic payments (credit, debit, ACH, electronic funds transfer or other electronic payment format, for example), then the vendor has a uniform price that would not violate the surcharge statutes.
    • If a court viewed the third-party vendor and landlord to be the same entity, then the landlord would be charging two prices: one for electronic methods of payment and one for in-person methods of payment. Whether the service fee is permitted would hinge on the variations of charges that would occur. Take the following scenarios:
      • If there were an option for in-person payment with credit or debit card that was the same price as other in-person means of payment (and the same uniformity in pricing were true for electronic means), then there would not be a surcharge for credit or debit card payments within the meaning of the statute. Any additional pricing would be due to the method of payment being online, not a fee for the means of payment being by credit or debit card.
        • For instance, rent is $100 and can be paid in-person (with cash, a personal check, credit card, or debit card) or electronically (via credit card, debit card, ACH, or electronic funds transfer). An electronic processing fee of $2.50 is assessed on all electronic payments for a total payment of $102.50, but no fee is charged for payments made in person – including those made in person with a credit or debit card.
      • The opinion states, however, that more difficult question arise if there is no in-person method of paying by credit or debit card. In such an arrangement, a tenant might argue she is incurring a credit-card surcharge because her only means to pay results in a higher price. But, the opinion says, because cash discounts are OK, this wouldn’t prevent landlords from charging a regular price and discounting it for cash customers.
        • For instance, rent paid electronically (including credit card, debit card, ACH, or electronic funds transfers) is the regular price of $505, while rent paid in cash is the cash-discount price of $500.

No changes to the TAR Residential Lease will be made at this time; however, members should be mindful of Paragraph 5D(3). Landlords should take care to ensure that if charging a reasonable fee to process or accept rent payments by electronic payment, the fee should be uniform. More specifically, ensure the total electronic payment by credit or debit card is the same total as other electronic means of payment (e.g., ACH, electronic funds transfer, or other electronic payment formats).

Categories: Landlords
Tags: property management, landlord, electronic payments

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Legal disclaimer

The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on Any legal or other information found here, on, or at other sites to which we link, should be verified before it is relied upon.

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