Dollar Car Allows Debit Card Payments & Lowers Rental Age
I saw an article on Travel Pulse about Dollar Car Rental teaming up with Dave Ramsey to spread the word on some new changes. After reading it I initially thought more choices for consumers is pretty much always better. The more I thought about it the more I came to the conclusion that this is bad for the uneducated. By uneducated I mean people who are not very financially savvy or who don’t understand credit cards or how credit works. The new changes Dollar Car Rental launched were to lower car rental ages from 25 to 20. The other was to be the first car rental company to allow debit cards to be used for payments.
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Two Reasons Why This Is Bad
I think the first change is good. Lowering the age limit to 20 makes it easier for younger travelers to rent cars. I may have selected 21 or 22 but I agree that 25 is too high.
The second change is what I have an issue with. Allowing people to use a debit card for car rentals is bad news in my opinion. It gives the uninformed a chance to make a bad decision. I think using a debit card for ANY purchase is bad news for a few reasons. Debit cards offer you no return for your spend and they offer less consumer protections. You also do not build/improve your credit when using a debit card. And if you have issues, like someone fraudulently using your debit card, that is YOUR money and it is held hostage until it is figured out. Where with a credit card your money would not be affected while you disputed the charge.
First Issue
I think it is particularly bad for car rentals because many credit cards offer some kind of renters insurance. Some, like the Chase Sapphire Reserve or Chase Ink Preferred (on business trips), offer full coverage insurance. This can save you money on your rental because you can decline the car rental company’s add on insurance. Even basic credit cards often offer secondary insurance. This means that the credit card company would pick up anything that your auto owners insurance policy doesn’t cover. Either way you have extra protection by simply paying with a credit card.
Second Issue
Secondly if you ever have an issue with the charges the rental company charges you there are protections built in for credit card carriers. You can work with the bank to dispute the charge if it is fraudulent. Since we all know car rental companies can be kind of shady you will want that protection. Plus that $200 hold they put on your credit card stays in pending but with the debit card the money will be pulled from your account. The money will be deposited back when the rental is returned but that is money you could use while on your trip.
Conclusion
I know Dave Ramsey focuses on financially irresponsible people and I get that many of them struggle with credit card debt. I think it is more important to teach them proper financial techniques and decision making versus giving them a crutch. They can treat a credit card the same as a debit card and pay it off as often as they want. Pay it weekly, bi-monthly, or monthly. As long as you pay it off it works the same way. But the plus side of it is you get something back for spending your money and you get protections that debit cards just don’t offer. Especially when you are talking about something like car rentals. Usually more choice is better for the consumer but I am not sure if that is the case here.
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Visa debit and credit have the exact same protection.
Are you saying for cars or overall? They have similar buyer protections for regular purchases but while you are working it out the money is taken from your checking account. That can be a huge issue for some.
I would consider Dave Ramsey’s serious lack of credentials before adhering to any of his advice beyond basic debt management techniques (where he has shown proficiency).
I understand why you feel the way you do about this issue however you do not understand Dave Ramsey or his ministry approach. His approach is that you don’t buy stuff you don’t have money to pay for. Many folks that go through his program to gain financial freedom have good credit but rack up huge amounts of debt as they cannot control themselves with or just feel the need to spend money they don’t have. It will then ruin their credit. Imagine telling an alcoholic that if they want to eat dinner at a restaurant they have to have it with wine or eat it in the bar. It’s about like that.
Most bloggers acknowledge that if you aren’t good with debt and credits cards don’t get into churning or rewards like most of us do. I think this blog post is a bit short sighted on this. I use a CSR to rent cars all over the world but renting from most agencies with a debit card isn’t all that hard. It just doesn’t give you as good of built in protections.
I personally think it is a crutch because if the person makes bad decisions with a credit card they are unlikely to all of a sudden make good ones with a debit card. Now granted you can only spend the money that you have with a debit card but you can overspend your budget just as easily with a debit card (although not to the same levels).
Practicing self control and proper decision making is most important in my opinion. Why can’t a person lower their credit card limit to say $2000 so that they can never get in too deep etc. If they treat it as a debit card it would work like a debit card. If someone is unable to properly budget they are going to have issues no matter if they are paying with a debit or credit card. Having credit usually just gives you access to more money than you have vs a debit card but there are ways to limit that ability in my opinion.
And Dan thank you for the great well thought out comment as always. I appreciate it even when we disagree 🙂
It reminds me of that saying “Give a man a fish, and you’ll feed him for a day. Teach a man to fish, and you’ve fed him for a lifetime.” DR prefers to give you that fish, at a cost of course, where there’s a mutual agreement between both parties that you aren’t able (willing) to be self-disciplined enough to catch the fish on your own.
I bring this up because his cult-like following, which again can be OK for those who need that first stepping stone to reach for, doesn’t really lead you down a path where you think for yourself, challenge ideas, numbers, question the accuracy of what you’re told and are ultimately brainwashed into believing that all debt is bad.
He speaks in absolutes whereas a lot of personal finance operates in shades of grey. With such a limited purview you have to question if it’s actually helping shape them for the rest of their journey or if it’s simply a crutch that you’ll always need to feel secure.
Right, I think majority of people live beyond their means, so Ramsey doesn’t want them to use credit cards. His program is offered in many churches. It’s amazing how many have major financial issues, which is why I really don’t share this hobby much any more.
Yep, after a decade long bull market with historically low unemployment rates its jaw-dropping that as of 2018 40% of Americans couldn’t afford a $400 emergency. While I truly understand what some people deal with, it shouldn’t be that hard to save up enough to cover 3 months of living expenses. It may not be easy and flat out suck, but hey, if its important to you you’ll do it.
I grew up with nothing, moved out at 16/17, no help through school, found myself in debt and had to teach myself everything. You bet your ass I made sure I got out of debt and put a cushion between myself and the streets. And no, it wasn’t easy at first.
It may not be your fault that you’re in your situation, but it’s ALWAYS your responsibility for how you respond. We all have our teachable moments, its what we do with these that define us. So yeah, 40% that can’t cover $400 in this economy? That high of a number is just laziness and entitlement and more to your point, it confirms we need to be careful with whom we share this hobby with, because they may very well be the reason we’re able to enjoy these subsidized perks in the first place.
Yes, there are obvious reasons why renting with a credit card makes worlds of sense more than a debit card. But there’s a crapload if Americans with such awful credit that there 0 chance they’d ever qualify for any credit card. For others that lack self control, being a prisoner of debt because of poor decision making skills means they foollow Dave Ramsey Gospel, and will never get a credit card. Ever.
One very important thing you missed about this new deal with Dave Ramsey, and the ability to rent with Debit Cards: If you create a loyalty program profile with Dollar, and your primary card on the profile is a Visa Debit Card, after the first rental is completed, you’ll not be subject to the additional $200 hold on your debit card. Even for those with credit, most rental car companies add a preauthorizaton that eats away at your available credit until the hold is released. For people that carry a balance on their card, and also have pre-authorizations for incidentals from a hotel they might be staying at, this adds stress to a vacation, which is meant to be enjoyed.
That is huge!!! And really a game changer for those that are good drivers and are wanting to use a debit card.
I didn’t catch the part about the $200 not appearing on the second rental – that is good news and does change things for sure. I still believe that telling people to never have a credit card is simplistic blanketed advice that often is not the best for the people. It would be better to preach proper decision making, budgeting etc. and he may do that as well but to say no credit cards ever is hurting many of these people imo. I also have an issue with him recommending mutual funds for kickbacks vs much cheaper index funds but that is another subject entirely.
I thank you for sharing your thoughts on both comments – good conversation for sure!
Or the fact that his average market return at retirement is laughably high at 12%. Or that at retirement you can safely draw down at 8%. He’s a decrepit old dud who’s only benefit to society is helping the completely financial illiterate (to which I admit he does serve a purpose) with circles and arrows. Beyond that, he tries to create this extremely limited scope in which you must act to reach wealth and it’s obviously terrible advice.
What we owe the public, preferably at a young age is to educate them and force them to think for themselves about personal finance. I’ve come across so many people who successfully got out of debt with his system but ultimately end where most of us in the churning/FIRE community begin, which is how to grow wealth and to do so with an open mind and not look at debt as this source of evil. Leveraged properly it’s an amazing tool.
Very true debt is used for good reasons every day in the business world, to purchase homes etc. And many are able to leverage cheap debt into money making opportunities. It has to be managed properly and you have to be diligent but I agree that teaching those skills are better than just saying don’t touch it.
Renting a car isn’t a fundamental right, it’s a business transaction. If one can’t obtain credit, he or she probably shouldn’t be trusted with a minimum $20,000 piece of equipment that can be totaled in an instant.
Also a fair point Steve.
+1
It’s also possible to purchase full coverage insurance from the rental company that would reduce the renter’s liability significantly. Yes, it’s probably going to be overpriced and almost certainly unnecessary. Then again that sums up the bulk of insurance payments, doesn’t it?
Steve & Mark:
You’re saying someone shouldn’t be trusted with a rental car just because they don’t have a credit card?!? I get it’s a privilege, not a right, but how you state this is incredibly snarky, and comes off as entitled.
I really hope neither of you ever have a big life event happens that causes an economic hardship, and you choose to use a debit card versus carry debt on a credit card with interest rates of 30% or more, that most of the promoted blog credit cards continously hawked like in this blog post.
I’m far from a Dave Ramsey champion; Frankly his preying on the Christian demographic with his Finanical Peace University, frequently held at churches, made the guy incredibly rich, and I have issue with that.
But to imply that someone shouldn’t be renting a car because of poor credit, and “shouldn’t be trusted with a $20,000 piece of equipment” is making big stereotypical judgments.
I can assure you someone that drives their Dollar Rental Car exceedingly carefully and is paying with debit card, hoping to not have to pay hundreds of dollars from their checking account immediately for damages, is much more trustworthy, than the guy that rents with his Chase Sapphire Reserve, and isn’t liable for any monetary damages because of Chase’s complimentary rental insurance, when he glances at Facebook on his smart phone, and damages the bumper of his rental.
When you’re immediately fiscally liable for car rental damage, versus a fancy credit card absorbing the fiscal liability damages, you have two different driving mindsets. I can assure you the debit card driver will be more conscious about possibly damaging the vehicle than a Chase Sapphire Resever cardholder feeling assured that good ‘ole Chase will be there to cover his butt with their included rental insurance coverage policy.
Driving ability has absolutely nothing to do with a FICO score.
Max M wrote: “Driving ability has absolutely nothing to do with a FICO score.”
Automobile insurance providers, landlords, and even employee hiring firms seem to think so. Why do you think soft pulls are run on prospective employees’ and customers’ credit reports?
It’s VERY possible that one who’s reckless with their credit can also be reckless with a rental. For example, when I was in my twenties (and had poor credit), I wasn’t as careful with rentals (cars and apartments) as I am now.
Sure, not everybody who has poor credit is irresponsible and reckless with auto rentals. But when entrusting complete strangers with your $25K-30K automobiles, you don’t want to take unnecessary chances. Protecting your investment is common sense.
Are you not doing exactly what you complained that we were doing by generalizing people that hold a Chase Sapphire Reserve saying they are more likely to drive less careful?
I think the one thing we can say for sure is someone that has poor credit is less likely going to be able to afford damages if they occur. That is not always the case but it is more likely for sure.
Sometimes it is out of your control when damages occur no matter how carefully you drive. Stephen at FM had hail hit his car and dent it out. Someone can open their door and hit your car while it is parked and the list goes on and on. Those types of damages could put huge stress on someone who is already behind on their bills and has bad credit.
Now they can pay for the overpriced insurance as well as a way to counteract that but that is also taking money out of their pocket that they would otherwise be able to have.
You know, there are people in this country who don’t have access to credit cards. But screw them, don’t let them rent cars I guess?
Fair point. I guess I just don’t want to see people that have the choice decide to use their debit card for the transaction because they are misinformed on how it all works.
I take your point, but Mr. Ostermann is right. I found this article because I just “paid” more than $1,000.00 to rent a car for a week: $300.00 for a “cleaning fee” (what did do, pay a neurosurgeon his average hourly salary to clean it with a toothbrush?!); the cost of insurance that was to be for the period is now magically for each day in the final invoice; and on like that.
If these shenanigans had happened with a credit card at Enterprise, I would have had the charges reversed so quickly it would have made their heads spin, and the folks at Visa and my credit union would have stood by me. As it is, I just remodeled some %*#!’s kitchen against my will, and for all intents and purposes, I have no recourse.
Thus, it’s not just the possibility of the problems Mr. Ostermann warns of that are worrisome: they are verifiably being realised, and Dollar is an unethical outfit using this policy for exactly the “shady” puproses Mr. Ostermann warns of. And I am not the only one; extensive research (hindsight is 20/20) reveals a host of such experiences by hundreds if not thousands of others, so anyone tempted to think I’m a disgruntled outlier should check for himself….
Shame on Dollar and shame on Dave Ramsay for endorsing the scum!
Get the word out: DO NOT RENT A CAR FROM DOLLAR (or anyone) USING A DEBIT CARD!
P.S.: Those of you claiming Mr. Ostermann’s point is that people without credit cards are untrustworthy or some such are entirely missing his actual point, which is to do with what just happened to me.
Not true. Everyone has access to credit cards, either unsecured or secured with a deposit. So the statement that there are people who don’t have access to credit cards is not accurate.
+1