Most rental car companies require a credit card to rent a car. If you’re trying to build (or rebuild) your credit with a secured credit card, you may be wondering: can you rent a car with a secured credit card?
The answer is yes, but there are a few things you should know about this type of credit builder card.
Now you may be asking: how much will a secured credit card raise my score when renting a car? Renting a car with a secured credit card can potentially hurt your credit, although the impact is minimal and short-lived.
Some rental car companies check credit as part of the reservation process, which puts a hard inquiry on your credit report. The impact of one hard inquiry on a credit score varies from person to person based on their overall credit history, but according to myFICO,
"In general, credit inquiries have a small impact on your FICO Score. For most people, one additional credit inquiry will take less than five points off their FICO Scores."
According to Experian , a credit check is usually only required for customers using a debit card to rent a car, and the impact of the hard inquiry usually dissipates within a few months. If you’re concerned about the impact of a hard inquiry on your credit score, it’s a good idea to call around to a few rental car companies to find one that doesn’t require a credit check.
There are many benefits of a secured credit card, one of them being you can rent a car with one. Car rental companies typically accept cards from any major credit card company or credit card issuer, including Visa, MasterCard, and Discover.
So, is there a difference when using a secured vs unsecured credit card? As long as your secured credit card is co-branded with a major payment network, using your secured credit card to rent a car is a lot like using an unsecured credit card. Just make sure you’re aware of your secured card’s credit limit and available credit.
When you rent a car using any debit or credit card, the rental car company puts an authorization hold on your card. This hold essentially makes part of your credit limit unavailable until you return the car and the final transaction is settled. This security deposit ensures the rental car company gets reimbursed for your rental fee, any damage to the rental vehicle, and additional fuel charges.
The hold amount varies depending on which rental agency you rent from and can even vary between different locations for the same car rental agency. According to TripSavvy,
"Typically, this amount is equal to your estimated rental charges plus the greater of a fixed-dollar 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 credit card hold would be $300."
The good news is, authorization holds don’t affect your credit utilization, so they don’t affect your credit score. Only posted transactions factor into your utilization, and authorization holds show up as “pending transactions” until you return the car and the merchant approves the final total.
However, authorization holds do impact the amount of credit you have available on your secured card. So if you have a $500 credit limit and the rental company puts a $300 hold on your card, you only have $200 in available credit. Trying to charge more than your available credit line during your trip could result in an overdraft or declined transactions, which could put a big damper on your plans.
Also, once you return the car, paying your final bill with your secured card can affect your credit utilization rate. If your final bill is $250 and your secured card has a $500 limit, your credit utilization rate is 50%. For that reason, you may want to reserve the car and pay the security deposit with your secured card, but use an alternate form of payment, such as cash, money order, or prepaid card, to settle the final bill.
Most rental car companies only require credit checks for customers using a debit card to rent a car. If you’re using a credit card — even a secured card — you may not need a credit check at all.
Here’s a look at the credit check terms from the published car rental requirements of several major car rental companies:
Alamo . Credit checks are not required.
Avis . Credit checks are required for renters using a debit card.
Budget . Credit checks are required for renters using a debit card.
Dollar . Credit checks are required for renters using a debit card.
Enterprise . Credit checks are not required.
Hertz . Credit checks are required for renters using a debit card.
National . Credit checks are not required.
Thrifty . Credit checks are required for renters using a debit card.
According to Experian, if rental car companies have a minimum credit score requirement, they don’t publicize it.
"Many are more concerned with specific types of information on your report rather than the score. For example, having a history of late payments or multiple delinquent accounts could make it harder to rent a car."
The requirements to rent a car can vary by location, so it’s a good idea to call your prospective car rental company ahead of time to verify the requirements before reserving your car.
Each of the major rental companies has different payment policies. Credit cards — even secured credit cards — are the preferred method of payment. Here’s a look at some other payment options.
Debit cards. Most rental companies accept debit cards, but they may require a credit check and place a higher authorized hold on your account. You may also need to show another form of ID, such as a utility statement or passport and a return travel ticket (airline or cruise) with an itinerary that coincides with your rental dates.
Cash. Very few car rental companies accept cash at the time you pick up your car. Dollar, Hertz, and Thrifty do, but be prepared to start the process well before your rental date and jump through some extra hoops. All three companies require customers paying with cash to apply for a Cash Deposit Identification Card by mail, pay a non-refundable $15 processing fee, and undergo a credit check. The process takes around 30 days. Most rental companies allow you to reserve and rent the car with a secured credit card, then pay the final bill in cash when you return the car but call ahead to be sure.
Prepaid card. Most car rental companies do not allow customers to reserve a vehicle using a prepaid gift card. However, they may allow you to reserve the car using a secured credit card and pay your final bill using a prepaid Visa, Mastercard, or Amex card.
Money order. Some rental agencies allow customers to rent a car with a money order. Those that do typically handle money orders the same as cash rentals, so plan ahead.
It’s entirely possible to rent a car with a secured credit card. However, before making your reservation, make sure your credit limit is high enough to cover the rental fee, security deposit, and any other charges you’re planning on putting on the card during your trip.
On average, renting a car costs $89 per day, according to Kayak, so if your secured card has a low limit, you may need to consider other payment options or credit builder programs. Call your prospective rental location to verify your payment options.
Janet Berry-Johnson is a Certified Public Accountant and freelance writer with a background in accounting and insurance. Her writing has appeared in Forbes, Freshbooks, The Penny Hoarder, and several other major outlets. See Janet on Linkedin and Twitter.
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