Sometimes it’s easier to get a mortgage than rent a car with a debit card. This could be part of the reason we found ourselves in that whole 2008 mess, but more importantly today, if you don’t like to use credit cards — or can’t get one — it makes renting a car unnecessarily difficult. Try and rent with a debit card and typically you’ll be asked for multiple forms of ID, a bank statement, three pay stubs, a utility bill, five letters of recommendation, a full body cavity search, and top secret clearance from NASA.
All for a late-model Kia.
But this week Dollar made the unusual move of making life easier for consumers. The rental car giant changed its debit card policy, essentially allowing people using debit cards to rent just like those with credit, and lowered the minimum age to rent from 25 to 20.
The move is a stroke of brilliance in an era when rental car companies struggle to stay relevant with younger travelers. As cheap rideshares have made traversing a new city easier than ever, young people with no credit have moved away from rental cars. This move eliminates huge barriers for young drivers and theoretically should help Dollar capture a coveted segment as it begins to develop brand loyalty.
The new policy eliminates credit checks for debit card users and lowers the hold placed on debit cards from $350 to $200, plus the cost of a rental. It also eliminates the requirement for proof of return travel and lowers the minimum age from 25 to 20.
The provisions are only valid on rentals reserved more than 24 hours prior to pick-up. Those renting within 24 hours — or renting convertibles, SUVs, luxury, dream, and premium vehicles — will still need to provide two forms of ID and proof of return travel plans. So you can’t just show up with a debit card and walk off with an Escalade. Your debit card has to be linked with a valid bank account too, so prepaid gift cards won’t cut it.
Why couldn’t we rent with debit cards before?
The extra security for debit cards and young drivers wasn’t completely arbitrary. Handing a 20-year-old the keys to a $10,000 asset, with no guarantee beyond a debit card linked to an account that may or may not have enough to cover rent, means you want some kind of guarantee.
Credit cards ensure that you’re trustworthy enough to have a credit card and that someone is going to pay if the car never comes back. Most credit cards have some kind of rental car insurance, and the rental company has more recourse with a large bank than it does with your checking account.
Still, as a federal reserve study showed 44 percent of Americans prefer debit cards — and nearly a full third of us don’t even have a credit card. Dollar saw this as a chance to gain an advantage in a highly competitive, commoditized market. By appealing to credit-savvy consumers and those who can only rent with debit, it has captured that entire market until the others catch up, if they even decide it’s worth the risk.
So as of this month, rental cars are now available to a previously-underserved segment, and hopefully, the Hertz’s, Enterprises, and Avis’ of the world catch up soon. For younger, credit-less drivers who may be more inclined to use rideshares when they travel, this opens up the world of rental cars that was previously off-limits. And as rental car companies strive to maintain market share amid advancing technology, this move makes sense for everyone.