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Credit,  Money Management,  Travel

Renting a Car – 4 Things You Need to Know

Let’s be honest here; renting a car is a pain in the ass.

Everything from getting to the rental office, to filling out loads of paperwork. Then you actually have to find your rental car in a sea of vehicles.

My goal here is to help ease your suffering and get you out of the rental office and on the road as soon as possible.

One thing I want to say upfront is that a lot of this information varies by company, state, and country. My hope with this guide is to help you make the best decision for your given situation. Do your own due diligence before committing to any purchase!

Let’s break it down.

renting a car

1. Reservations

For the best price, make your reservation beforehand. This can usually be done online and there are always deals to be had.

Unless you MUST have a larger vehicle, I always go for the economy and compact models. They are cheaper in every way. If you prefer a bigger vehicle, you might still get lucky and get upgraded at no extra cost; happens to me all too often. Those economy cars are popular and they sell out fast.

If you have the option, avoid renting a car from the airport. They tend to be more expensive due to fees, taxes, and convenience.

In order to complete the reservation, you will need a credit card. The use of a debit card to make a reservation may be possible at some locations but call ahead to make sure first. And keep in mind, whatever card you use to make the reservation will be required when you pick the car up.

2. Payment Methods

Debit vs Credit vs Cash

A large number of car rental companies won’t accept cash payments. A few will take cash for the final payment upon return of the vehicle. If you do find a company that is willing to accept cash, be prepared to jump through a number of hoops to do so. In my opinion, not worth the trouble if you can avoid it.

All customers, whether paying with debit or credit, will undergo an ID and Drivers License check as a first step before renting the car. This part of the process is pretty standard.

But that’s where the similarities end.

After reviewing numerous company policies, I found a wide range of differences in regards to their acceptance of debit cards and how payments are handled when renting a car.

For example:

  • Some require a credit card in order to qualify and make a reservation, but will only allow a debit card to be used for the final payment. 
  • Others will allow debit cards to be used for the complete rental process.
  • A handful of companies will only accept debit cards with proof of a confirmed round-trip travel ticket (airline, cruise, ship, or train) and must be shown at the time of rental (weird but, whatever).
  • A couple of companies will limit your rental options to only a few model cars if you pay with debit.

One last and very important thing to be aware of is if you decide to pay with a debit card, you’ll likely undergo a credit check by the rental agent. Not only will this negatively affect your credit score but now you get to wait at the rental counter, longer. Lucky you!

The required deposit

Renting a car requires a deposit. 

If you pay with a debit card, you will need to have the funds available in your bank account before you can rent a car. Depending on the length of the rental and the type of vehicle, the deposit could add up to a hefty sum of money.

By paying for a rental with a credit card, you keep your money in your account where it belongs and just a portion of the credit cards available funds will be tied up.

Getting your money back

After returning the vehicle, your deposit may be held for a week, or more (up to a month), before those funds are released and show up in your account.

In the meantime, if you paid with your debit card, let’s just hope you don’t need that money for anything else (rent, food, or important things like coffee).

Also, if you pay with a credit card and the rental agency tacks on charges in error (or maybe not), you can dispute the charges through your credit card company. The rental company is more likely to negotiate because they haven’t yet been paid for the portion of the bill not in dispute.

With a debit card, they have your money. It’s less likely that they’ll negotiate a dispute.

3. Insurance

Car rental companies want you to buy their CDW (collision damage waiver) insurance. When you buy CDW, the rental company surrenders its right to charge you for damage (with a few exceptions) to a car rental. It is very profitable for them, often times costing even more than the car rental itself. The additional cost can be as much as $30/day or more. For some, this expense is worth it.

But let’s look at a few alternatives:

Alternative Options

There are other options available if you choose not to fork out the extra dough for CDW. Just a heads up, with both of these options, if something happens to your rental, you will have to pay for the damage upfront and then file a claim later with your insurer.

  • Your own auto insurance:

In most cases, your own personal auto insurance will cover you in the off chance that something happens to the car. Just to be safe, check your coverage with your auto insurer first before renting that car..

  • Your credit card benefits:

Many credit cards come with some level of car rental insurance.

Some credit cards provide primary coverage for rental cars, meaning it pays out first before your insurance.

Others only provide secondary insurance that covers anything left over after filing a claim with your own auto insurance company.

Check with your credit card company before making the reservation as the type of coverage you receive will vary.

Either way, if you pay with your credit card, you should pass on the car rental company’s accident insurance coverage. If you pay with your debit card, you may be required to buy the extra car rental insurance even if you have your own.

An important note is that no alternative source of collision damage coverage—be it your auto insurance or your credit card—completely isolates you from risk. For some people, paying the cost of CDW for peace of mind is worth the hefty sum of money.  Do what suits you best.

4. Foreign Transaction Fees

If you’re renting a car outside of the country, paying with a credit card could save you from the pesky foreign transaction fee (check your card benefits first). This fee is tacked on to transactions processed outside of your home country. 

I learned this lesson the hard way:

I reserved a room at a hotel in Austria through I assumed my payment was going to be processed through, but instead, my information was forwarded to the hotel in Austria who then charged me directly. My credit card didn’t cover foreign transaction fees so I was charged extra for the transaction. After contacting my bank they were nice enough to return the money to me, but knowing what I know now, it all could have been easily avoided.

renting a car

I hope you found this guide useful.

Before signing your name on the dotted line, get as much information as you can about the initial and final costs of renting a car. Don’t assume anything. If you’re not satisfied for any reason, try another company. With so many to choose from, make them earn your business.

Is there anything I missed?

If you’re a seasoned traveler and have any tips, we want to hear from you! Write to us in the comment section below!

Happy travels!

- Derek

Finance Coach, Foodie, Writer and Traveler. When he is not working, he travels(top of the list is Europe) in search of amazing history and to gorge himself on bread products.

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