More Renters Are Using Tools to Skip Security Deposits, but There’s 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.

Article source: https://www.nytimes.com/2026/06/05/your-money/renting-security-deposit-alternatives.html