Car Rental Series #2 Debit, Credit, and Licenses, oh my!

By Karine Green

Photo Credit- Canva

There are a few reasons a debit card for a rental car may or may not be the best option. Here are some pros and cons of using debit versus credit cards.

1. With a debit card, there could be a hold on funds. This would be an authorized amount, not just an inquiry. This hold can tie up funds you would otherwise use for your trip. If you do plan on using a debit card, make sure you plan for the extra funds to be held in there, so you’re not caught without a food budget or hotel budget money. Some rental companies may waive a deposit with a credit card.
   1. Some companies MIGHT:
      1. Require a credit check and score above 730-750 to use a debit card.
      1. May require a very large deposit, 2k or more, especially if it is a smaller company with a limited fleet.
      1. May require an arriving and departing flight that matches rental pick-up and returns. That would mean a proper round-trip flight, not a stack of one-ways that have flexible use. Normally, the flight must be pre-purchased before the day of pick-up.
         1. IMPORTANT NOTE: some in-state residents who are renting at an airport may not be allowed to use a debit card.
      1. Currently, I have interviewed about 14 different companies. Of them, NONE accept cash cards, such as PayPal, Chime, Venmo, Payoneer, Dash Cash, or any other prepaid cards. Prepaid cards are basically the same as throwing hot lava at the car rental staff (just watch them run away to get a manager to decline your rental.) Some companies will accept credit cards sponsored by Chime or PayPal. Please double-check policies on the website, or consider having a backup credit card, just in case.
      1. Most companies will allow you to change the method of payment from a credit card to a debit card (or even a prepaid) upon the return of the vehicle.
2. A consideration for debit cards: The extra hold could cause a potential for overdrafts on the account and negate any savings that you may have in place for the trip. This can be especially problematic, especially if you had set other bills to auto withdrawal. For example, we don’t want the house payment bouncing while we’re on vacation for a few weeks because of an unexpected hold/deposit for the rental car.
3. Debit cards offer very limited fraud protection. It’s almost like paying cash. If your debit card information is compromised, it can be more difficult to recover the stolen funds. Credit cards may have fraud protection to help insulate against fraudulent charges. And the reason I bring this up here is that you’re traveling to a new place and you’re probably going to be at an airport where theft and fraud can be a little more sophisticated.
4. Rental car coverage: many credit cards offer rental car insurance coverage as a benefit. If you’re using a debit card, no such coverage would be offered. You could use your own insurance, or you could use what is called the damage waiver. The damage waiver essentially is the rental company forgiving any damage to the vehicle. They will not file a claim on it, they’re just going to fix it. I will address the damage waiver in another entry.
   1. If you are curious if your credit card company offers car rental coverage, call them and find out what the terms and conditions are. They vary wildly and I will not address their coverage in depth. Some cover only your insurance deductible. Some only reimburse your insurance company. Some pay the entire claim without further questions (acting much like the damage waiver.) Some require activation or a small fee (I think some are as low as $12.) You get the idea; check the card you want to use and find out what you need to do to make sure coverage is in place.
      1. Side note. Some states do not allow rental companies to talk to your credit card company about claims. You may have to take care of managing the claim (a quick visit to the website can help confirm policies before renting will set up your expectations.)
5. CAVEAT: booking through a company like Travelocity, Kayak, Orbitz, or another third-party tour booking company to get around the rental company’s debit card policy could leave you trying to seek a refund from these companies when the car rental company turns you away.
   1. Friendly reminder, you will be held to the rental company’s policies, not the third-party booking policies. Know what you need to do at the car rental counter to avoid disappointment.
6. CAVEAT: Leaving the card (debit or credit) that you booked the reservation with at home could leave you carless, especially if you are using the skip-the-counter features! Part of their security procedures is you must present the card that was used for the transaction and your ID. No, spouses and parents can’t pay. If you have been able to do this in the past, you have found an inattentive employee. I didn’t find a single company that allowed someone to rent a car using someone else’s credit card. I found a few companies that would allow customers to pay for someone else’s rental at the end of the rental, but not to start the rental.
   1. Note: Direct Bill is when a company or employer is paying for the rental. It’s not the same thing as using someone else’s credit card. Companies routinely draw up contracts for rental cars to keep their employees mobile.
7. It probably goes without saying that you need a driver’s license, not a state ID. In rare instances, foreign travelers may need a passport (or other id) to accompany their driver’s license.
   1. For example:
      1. When your license looks like a biohazard, the employees will not touch it.
         1. There have been reports of licenses covered in grease, lipstick, and tar. All were rejected. If it’s sticky when you try to hand it to the clerk, they most likely will not take it. Meaning you cannot get your rental.
      1. Your state updated its license format, and the true ID isn’t working properly.
      1. Sometimes foreign licenses aren’t recorded in true ID, so a passport would be required.
      1. Please note that some state laws may vary regarding the condition of the license. A small split or crack in your license may be OK in one state but not in another. In fact, in most states, it’s not OK. But there are enough people who have argued over it, I assume there must be one state out there that accepts it. (If you know which state accepts cracked, peeling, or damaged licenses, let us know in the comments.) You’re going to want to make sure your driver’s license isn’t expired or damaged because they will not rent you a car if they are in a state that will not take a damaged license.
         1. Yes, I know, you can buy a car in most states with an ID. But in a rental situation, you are not buying a car. You are driving a car. Arguing with the rental staff will not change this.
      1. If a license expires or will expire during your rental, they will not rent to you.
8. Using a credit card can provide many benefits. Besides the possibility of insurance coverage for the rental car, many car companies we’ll waive a security deposit. By using your credit card you also can dispute any charges that may be added after the rental is completed, such as the gas tank not being quite full, any pre-existing damage that the previous renter caused that was missed, and now they’re trying to say you caused.
9. No choice but to use your debit card? Purchasing an all-inclusive travel policy from a travel insurance company such as National General, Allianz, Zurich, or Travelers can greatly reduce the overall risk to your entire vacation, not just your car rental. Please contact these companies individually for more information.
   1. Your car insurance company may have some temporary add-ons. Call your agent to find out which add-ons you are eligible for.
10. I understand wanting to pay cash for everything or to use the Dave Ramsey system of everything in its “envelope”. Obviously, this helps to prevent overspending. And it’s a simple way to maintain your monthly budget or your vacation budget. However, in terms of a rental car, when things go wrong, they go wrong expensively and in a manner that auto insurance companies argue over. It may be best to just get yourself a good travel credit card and then use the cash from your bank account to pay it off instantly. While the car rental company is checking you in, you can head to your credit card app and make a payment at the same time they put the hold on the card.

Enjoy your drive! Hopefully, this series will give you the knowledge to be a true travel pro. Travel pros can get through the line faster than Superman can save Lois.

Next time: Do you need a rental car or will a taxi do?