Rental Cars: Credit vs Debit Cards

Paying for a rental car can often be done by credit or debit card, though there are a number of factors which affect whether one payment method is better than the other.

Rental car companies' policies regarding payment methods, deposits, and holds on funds vary widely, both by the company and by the individual rental car office. Within the same rental car company, two local rental offices may have different policies on debit card acceptance, deposits, holds on credit cards and reservation policies.

When you reserve a rental car, review your location-specific rental agreement, provided your rental car company allows you to see it when you book your rental vehicle. This rental agreement will tell you whether you can pay with a debit card. If you can't view your agreement, call your rental car office, even if it is in another country, and ask about payment options for your reservation.

In general, paying with a credit card is the better choice because you do not have to give the rental car company direct access to your bank account. Additionally, you can dispute charges through your credit card company if you are charged in error, and you will not undergo a credit check, which could affect your credit rating.

Debit Card

If you are renting within the United States, there are several issues that might arise if you want to use a debit card to reserve and pay for your rental car.

Many US rental car companies accept debit cards for payment when you return the car, but require you to provide credit card information when you pick up your rental vehicle. Similarly, many Canadian rental car offices will not allow you to pick up your rental vehicle using a debit card. You will need to allow the rental car agent to swipe your credit card when you sign the rental agreement.

Those rental car companies that do allow you to pick up your car using a debit card will usually only permit you to use your debit card to guarantee your rental if you pass their credit check criteria. This means that the rental car company will run a credit check on you, probably through Equifax, before you finalize the rental agreement.

If your rental car company lets you pick up your car using your debit card, the rental agent will place a hold on funds in the bank account tied to the debit card for an amount equal to the estimated rental charges plus a deposit, typically $200 to $300. This deposit amount varies by location, but your deposit will be returned to your bank account after you drop off your rental car.

Should you return your rental car late or in a damaged condition, your signed agreement gives the rental car company the right to withdraw funds from your bank account to cover late fees or damage repair.

Credit Card

If you plan to reserve and pay for your rental vehicle with a credit card, there are also a few issues. You may not need to provide credit card information when you reserve your rental car, but you will need to show your credit card and photo ID to the rental agent when you pick up the vehicle. The agent will swipe your card before you sign the contract.

Many US rental car offices place a hold on your credit card when you pick up your rental vehicle. Typically, this amount is equal to your estimated rental charges plus the greater of a fixed-dollar amount or a percentage—normally 15 to 25 percent—of the estimated rental charges. Therefore, if your estimated rental car charges are $100, your credit card hold will be $100 plus either a specific deposit amount ($200 is a good starting number) or $15 to $20, whichever is greater. In this example, your total credit card hold would be $300.

When you return your car, the hold will be removed and your credit card will only be charged for the actual amount you owe. If the car is damaged or returned after the deadline, you will face additional charges.

Some rental locations will not accept prepaid VISA and MasterCard cards. If you plan to pay for your rental car with a prepaid card, call the rental car office before you make your reservation to find out if it will be accepted.