If you’ve ever approached a rental car counter with a debit card in hand, you’ll know it can get ugly fast. But there are very good reasons why debit cards are poison for rental car companies.
Debit Cards & Credit Cards Are Not The Same
For those who do not carry many credit cards, the difference between the Visa debit card in your wallet and a credit card may not seem different. But they are. Credit cards have the ability to attach debt, more is required to sign up and maintain a credit card than a debit card account and there are recovery options available as a result.
When a card of either kind is swiped at a vendor, the amount required for the purchase is the only amount authorized at unless a special hold is registered for that vendor, such as hotels or tips at restaurants. That authorization, which holds the money in the account unavailable for spending, needs to remain relative to the cost of the purchase.
When using a credit card, the act is essentially harmless unless you are at the very height of your credit line. However, with debit cards, authorized funds reserved are the cash in your checking account and you must have enough to cover the cost and the hold.
Nefarious Characters, Nefarious Intentions
There are bad people in the world, and while you may not be one of them, they exist and pertinent to this post – they rent cars. Some nefarious renters need a rental car but have only enough money to rent for one day, though they need the vehicle for far longer. If one presents a registered but pre-paid debit card or from an account where deep personal information was not collected, the renters really don’t have much incentive to return the car on time and in good shape.
Some rental cars are rented to conduct criminal activity. Often if a rental car reeks of marijuana, it’s not someone’s medicine in their pocket – the car has been used in illicit transactions to make the criminal less easily tracked. In many of those cases, someone other than the “entrepreneur” is the renter who is compensated a small amount for being the face of the transaction.
Some rental cars never come back and from those in the know, that’s rarely from those who have presented a credit card at checkout.
Weeding Out Potential Issues
Rental car companies are massive conglomerates, may be publicly traded and can seem inhuman. However, some locations are just franchises and an unrecovered rental can be a horrifying proposition to the franchisee. By putting some basic roadblocks in place to discourage those with poor intentions, rental car companies can protect themselves without excluding unsuspecting, honest consumers.
National, Alamo, and Enterprise will accept debit cards but place a hold of $250 above the total price of the rental on the account ($1000 if paid in cash.) This helps the chain to limit their exposure but most importantly, removes cash transactions. ERAC (Enterprise Rent-A-Car companies) also require a “return” ticket to use the debit card at some locations which can be an airline ticket, cruise ship voyage but not a bus ticket. That weeds out most potential issues without penalizing the customer base extensively. Genuine customers do have some exceptions that could make this unnecessarily painful, but most fall outside of these roadblocks.
Debit card customer holds can be collected as soon as the car rental firm can determine that they have damage exceeding the held amount or when the car isn’t likely to return. But that’s a pretty pathetic sum. Some car rental companies are self-insured (they don’t have an outside insurer to pick up the tab) which leaves them in a tough spot.
There’s a legal remedy too. After all, someone gave a driver’s license at the checkout counter and a matching debit card, so a judgment can be secured against the value of the car. But that can take a long time, cost a lot of money to prove if taken to trial and even then, it’s not a sure thing.
Credit card customers offer more recourse. The rental car companies can attempt to obtain additional funds to recover an unreturned car or unpaid damage. They may offer some help especially since most credit cards will exceed the limit temporarily against a charge.
There are plenty of rental car customers that use their debit cards as their primary method of payment. While using debit cards over credit cards isn’t advisable if given the choice, with some effort they can be accepted by rental car companies. Those rental car firms have a reasonable concern regarding their asset that other vendors do not and it seems reasonable to me that debit card customers should be willing to show additional safety measures to take the vehicle, likely 100 times as expensive as their rental.
What do you think? Are rental car companies right to treat debit cards with skepticism? Is there another way for rental car companies to protect themselves other than deposits and discouraging debit cards?