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Most rental car companies accept debit cards, survey finds

But expect to face extra restrictions, conditions

By Amy Buttell Crane

With credit card companies canceling accounts and slashing credit limits, using a credit card to rent a car this summer m­ay not be an option. While it isn't as easy to rent a car without a credit card as it is with one, it is possible, a survey conducted by Creditcards.com reveals. Most rental car companies accept debit cards, survey finds

Just four of the 45 rental car agency locations contacted in the telephone survey said they refused, under any circumstances, to allow consumers to rent a car rentals with a debit card. The other 41 locations permitted customers to use a debit card to rent a car -- however, all but one of those locations required users to meet at least one extra qualification requirement in order to do so. For example, 24 locations require an additional deposit, and 10 mandate a credit check. (See summary of debit card policies at car rental agencies.)

The CreditCards.com telephone survey included 45 locations from nine major rental car companies: Alamo, Avis, Budget, Enterprise, E-Z Rent-A-Car, Hertz, National, Rent-A-Wreck and Thrifty. CreditCards.com called five different locations at airport and nonairport locations throughout the country -- ranging from Los Angeles and Chicago to Erie, Pa., and Wayne, Mich. -- asking whether the use of debit cards was allowed and what restrictions were placed on that use if they were allowed at that location. Among the nine rental car companies surveyed, some were consistent in their policies, while others were all over the map. Because many rental car company outlets are operated by franchisees who have a certain amount of control over how they do business, debit card policies vary by location. (See  (12 tips for renting a car with a debit card.)

This is the second consecutive year CreditCards.com has surveyed a large sample of car rental agencies about their debit card policies. In 2008, all 45 locations surveyed indicated that they would accept debit cards. However, the shrinking number of locations that accept debit cards for car rental may or may not represent a trend, as different locations were surveyed each year. 

Unlike credit cards, which require users to borrow money from credit card issuers to pay for purchases, debit cards draw funds from the user's own checking or savings account. Debit transactions are limited to how much cash is available in those accounts, which fluctuates during a given day as funds are spent and deposits made. In addition, financial institutions may impose daily limits on the amount of transactions processed with debit cards, in contrast to credit cards, which typically don't have daily limits, leading rental car companies to be more wary of debit cards than credit cards.

Answers vary; call around
The survey revealed that while outlets of most companies allow debit card rentals and payments, additional requirements to use a debit card may be needed. Typically, rental car companies want to see a debit card with either a Visa or MasterCard logo that is affiliated with a bank, savings and loan or credit union.

Additional requirements may include:

  • Hold of additional funds on your card (anywhere from $100 to $500) until the car is returned -- 24 locations required this
  • Credit checks -- 10 locations 
  • Full-coverage car insurance -- 8 locations
  • Copy of return airline ticket or e-ticket itinerary -- 7 locations
  • Recent utility bill, such as a phone, gas, electric or cell phone -- 5 locations
  • Verification of employment or pay stub -- 4 locations
  • Address on driver's license or passport that matches that on the pay stub or utility bill -- 4 locations
  • Restrictions on taking the rental car out of state -- 1 location

Some rental car company outlets were happy to rent to local residents using a debit card, but refused to rent to out of state customers, while others allow debit card usage from out-of-state residents, but not locals. Many had age restrictions on top of debit card restrictions -- most typical was that the renter using a debit card had to be 25 years old or older. In addition, many rental car company offices place a hold for a larger deposit on a bigger car than a smaller car.

How one rental car company's policies
varied from location to location
Shop around. Car rental agency policies in regard to accepting debit cards vary widely. This example shows how five Budget rental car locations responded to CreditCards.com in inquiries.

City

Requirements

Amount of hold

Length of hold

Albuquerque, (N.M.) International Sunport

Must be connected to a bank, credit union or savings and loan. Must be at least 25 years old

$400 minimum

Until car is returned

Charlotte, N.C.

Must undergo a credit check

$400 minimum

Until car is returned

Newark (N.J.) International Airport

Not accepted

 

 

Dane County Regional Airport, Madison, Wis.

Must undergo an Equifax credit check. Must be at least 25 years old

$500 minimum

Until car is returned

Spokane, Wash.

Must undergo Equifax credit check

$400 minimum

Until car is returned

For those offices that required a credit check for customers using a debit card, a credit score minimum was typically 525 or above. Many of the offices with this requirement said they used credit bureau Equifax to run the credit check. The check may affect your credit score as credit scoring formulas takes a negative view of borrowers with too many recent inquiries.

If you're interested in using cash to pay for your rental, many rental car company offices are happy to accept cash to pay for your rental at the end of the rental period as long as you secure that rental in advance with either a credit or debit card. Some companies, upon an advance credit check and approval, will allow you to pay cash for your rental if you provide a substantial deposit.

National office policies
The websites of most rental car companies provide information in their frequently asked question sections about debit card acceptance. Some have firm policies, while others leave it up to individual outlets. That's why it's important to call around before renting a car -- whether locally or out of town -- not only to see if you can use your debit card, but also to secure the best rate.

Rent-a-car companies view customers with credit cards as a better credit risk. As they see it, they are entrusting an expensive asset -- a car worth $20,000 to $30,000 or more -- to a customer, and they want to do whatever they can to ensure the car will be returned on time in the same condition as when it was rented.

Avis/Budget Group's approach to customer debit card use is typical among major rental car companies. While most U.S. locations accept bank-sponsored debit cards with the Visa or MasterCard logo, there are some restrictions, notes Alice Pereira, public relations manager. "Credit report queries are performed when a renter chooses to rent via debit card, as opposed to simply using it to pay for their charges upon return, she says.

"This is a typical procedure in our industry in order to minimize the potential for loss associated with this form of payment," she adds. "For example, if the renter damages a vehicle or keeps a vehicle beyond the reservation dates, in either case the amount of money in the debit card could easily be exceeded, leaving us unable to collect. By checking a customer's credit, we are better able to determine if there is an unacceptable risk in accepting a debit card for payment."

Many great customers don't have credit cards and that shouldn't, in and of itself, be a barrier to renting a vehicle.

-- Jason Manelli
Rent-A-Wreck

Only one company -- Rent-A-Wreck -- is unequivocally enthusiastic about debit cards, regarding them as an important payment option. "Customers using debit cards as payment and for their deposits make up about half of our customer base," says Jason Manelli, a spokesman for Rent-A-Wreck. "Many great customers don't have credit cards and that shouldn't, in and of itself, be a barrier to renting a vehicle." He notes that the company's market niche includes many younger customers and those who use cash. Serving those markets, along with the debit card market, is one way Rent-A-Wreck differentiates itself from its competition, Manelli says.

"From a nuts-and-bolts actuarial perspective, as a rental car company, we are in the business of managing risk every day," he continues. "We do take more risk in doing business with debit card customers, those under 25 and cash customers. Part of our advantage in risk management is that we have a fleet of used vehicles, two to five years old, that are less expensive to buy and insure. By using our proprietary qualifying procedures, we train our franchise owners to take the necessary steps to manage the risk of dealing with a variety of customer profiles."

Here is a sample of the various other company policies: 

  • Enterprise: Policies vary, depending on the location.
  • Budget: At locations that accept debit cards, a hold of either $300 or 25 percent of total charges, in addition to the rental charge, is required. Some locations require a hold of an additional $500.
  • Hertz: A credit check through Equifax is required as is a hold of $200 above the cost of the rental.
  • Thrifty: A credit check through Equifax is required. Other requirements vary on location.

Debit card usage rising
Until recently, many rental car companies didn't accept debit cards at all. But as debit card usage grew, they recognized they were missing out on business, so policies were fashioned to allow debit card acceptance while limiting risk.

Visa reported in May that, during the last three months of 2008, customers made more transactions using debit cards than credit cards -- a first. In 2003, debit and credit card transactions outpaced the use of cash for retail transactions. Experts only expect the trend of debit card usage to grow, as younger consumers who grew up using debit cards instead of cash increase their spending.

According to the Federal Reserve's most recent Survey of Consumer Finances, 73 percent of U.S. families had credit cards in 2007. In 2008, according to Javelin, 72 percent of consumers indicated they had used a debit card in the past year -- an increase from 65 percent in 2007. With credit card companies slashing limits and consumers on tight budgets due to the economic recession, many consumers either can't use their credit cards or choose not to, making debit cards more popular than ever.

See related: Renting a car with a debit card? Expect to try harder, Compare credit cards' rental insurance policies, 12 tips for renting a car with a debit card

Published: July 9, 2009


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