More Renters Are Using Tools to Skip Security Deposits, but Theres a Catch
As renters struggle to cobble together cash for the upfront costs needed to sign a lease, financial technology firms are promoting alternative tools to manage a common pain point: security deposits.These firms team up with landlords and management companies to allow tenants to pay smaller monthly or annual fees that replace the traditional lump sum that can be a stretch for many renters.It often works like a type of insurance.These options are useful in the short term because they help keep cash in your pocket, but they do not replace the function of a security deposit.
If your landlord files a damage claim during your lease, none of the fees paid to the alternative services apply toward those costs.In this way, the services may offer fewer tenant protections and can even end up costing renters more, new research from the National Consumer Law Center found.Still, millions of renters use the services.
“They’re quite widespread,” said April Kuehnhoff, a senior lawyer at the center and an author of the report.She added that the tools tended to be more common among large property managers than “mom and pop” landlords.Here’s what to know about these security deposit alternatives.What rental costs are usually required upfront?In addition to requiring an application fee, landlords may demand an amount equal to the unit’s rent for the first and last months, plus a security deposit of typically about $800, according to a 2025 survey of recent renters by the real estate site Zillow.Landlords hold the deposit to cover any missed payments or damage beyond normal “wear and tear” — like claims of pet damage or broken appliances — when the tenant moves out.
If the landlord makes no claim during the lease, the amount is refunded, sometimes with interest.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.If you are in Reader mode please exit and log into�...