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Renting A Car With Debit Card

Some friends and I were recently discussing rental car strategies, one of them was planning a vacation to Hawaii, when the subject of debit cards came up. None of us had ever rented a car with a debit card before (we did begin our personal finance development in the era of free and cheap credit after all!) and that was the only card my friend had! To be honest, I didn’t think it mattered if the card was a credit card or a debit card (and I erroneously said so!), but I was wrong.

I usually advise against the use of debit cards [3] because the card is linked directly to your bank account. One erroneous or fraudulent charge can have a cascading effect that generates an avalanche of fees and penalties. I’ve read and heard many a story of a dozen insufficient fund fees and low balance fees following some key-in error, it’s terrible.

Anyway, it turns out that renting a car with a debit card is a big pain in the ass. The reason is because your “credit limit” is really the funds within your account, unlike with a typical credit card. The end result is that many companies will tack on a “reasonable premium” to cover the rental period and potential overages such as fuel and damage to the vehicle.

For your convenience, here are the policies of major companies:

As you can see, using a debit card is a bit of a pain and sometimes the hold can last up to two weeks after the rental! That’s a very long time.

My advice? Get a credit card with auto rental liability insurance [12] and use it to rent your car. The card provides some supplemental insurance, you don’t have to deal with debit card hassles, and maybe you earn a few points along the way.