Why Rental Car Companies Usually Prefer Credit Cards
For people that are used to renting cars, they must have noticed that rental car companies usually request for credit cards as means of payment. For the benefits of those who are still new in the system and are planning to rent a car, let me mention here that rental car companies will require that you pay with credit card.
What happens if you don’t have a credit card to pay rental car companies?
That is a very big question! Asking for credit card as a medium of payment to rental car companies is a norm. Doing otherwise is like departing from the well-established and recognized practice. While I may not say emphatically that you will not be able to hire a car if you don’t have a credit card, it may be very difficult for you to find rental car companies that will accept a debit card from you. I know that you will be asking in your mind the question “Why?” After all, your debit card is funded. Well, I will explain to you why rental car companies don’t usually accept debit card.
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When you rent a car, rental car companies already have a standard rate that they will charge you and they will expect that you pay the amount immediately. I think this is the area where people are having the misconception that they should be able to pay either by credit card or debit card. Well, you need to understand that the contract does not end there. Rental car companies are actually taking risks by lending you their car. Anything can happen to the car after you leave their office. You can get involved in an accident. You may even disappear and not return with the car. So, what happens in these instances? Who bears the loss? That is the real issue! If they accept debit cards, there may not be any way to get their money from you because if at all they have your debit card number, you may need to enter your card PIN before any payment can go through. But with credit cards, they can easily charge additional costs to your credit card.
Another strong reason they may not accept debit cards is that, the transactions you make through debit cards are not reported to credit bureaus. But if you try to run away with the car or any amount payable by you, the rental car companies will charge the costs to your credit card. At least, the rental car company that hired you their car can rest assured that their money will not be lost. How to settle your card balance will now be between you and your credit card provider. If you fail to pay your card balance, it will be reported to the credit bureaus. And this will ding your credit. This may make it difficult for you to access credit in the future.
Credit cards actually give the rental car companies confidence to release their cars. They believe that, before you can be issued a credit card, you must be having a certain level of good credit history. Besides, some credit card companies provide insurance coverage for damage to rental cars.
Read Also: Debit Card Vs Credit Card. Which is better?
However, above explanations notwithstanding, few rental car companies can still accept debit cards. But such companies may require that you deposit a substantial amount before the car can be released to you. On the other hand, some rental car companies will like to carry out your credit check before they allow you to rent their cars. This is a way of determining your creditworthiness. If your credit score is too low, you may not be able to hire the car. I believe you know the implication that credit check can have on your credit score. Each time a credit check is conducted on you, it lowers your credit score a bit. So, there may be a need to ask the rental car company if they are going to check your credit.
Let me mention here that you will be at an advantage to pay with a debit card if you have a personal car insurance with enough coverage. Even if your coverage is not enough, you may purchase additional coverage. This will give the rental car company a sort of confidence that they won’t incur any loss in case you have an accident with the rental car.