DID YOU KNOW: Renting a car with a debit card can result in a credit inquiry?

Date: June 25, 2020

If you walk into a bank with the intention of applying for a credit card, you probably know they’re going to pull your credit report and credit score. Likewise, if you walk onto a car lot and ask the salesman what kind of financing deals they can offer, you probably know they’re going to pull your credit report and credit score. But what about when you ask to pay for a car rental with a debit card? Did you know that will likely result in a credit inquiry as well?

Although rental car companies are not traditional creditors they are, in fact, providing a service and allowing you to use one of their very valuable assets, a car. While you are obviously paying for that privilege, the fees the rental company charges are far less than the value of the car, so the rental company is going to want to feel comfortable that you are a responsible person, and that you will be able to pay for any damages to their car during your rental period, and that you’ll be able to cover the cost of excessive extensions of your rental period. Debit card users don’t instill a lot of confidence in rental companies, regarding their ability to pay for these things out of pocket.

Credit card users don’t have the same issues. Generally the available credit line of a credit card is going to be considerably larger than the amount of money you have in your checking account, which acts as your debit card’s limit. The ability to pay for a repair with a credit card is much more plausible because of the larger spending capacity.

One way to alleviate their concern over your ability to pay for repairs is to run a credit report. Having a good credit report means you’re of minimal risk for any type of extension of credit, including renting a car. Having a poor credit report will likely cause the rental car company to disallow your use of a debit card, and if you don’t have a credit card as a backup option, you may find yourself unable to rent a car.

There’s also the issue of potentially lowering your credit score. When the rental car company pulls your credit report, a credit inquiry will be posted. Credit inquiries can cause minor drops in your scores, which typically recover quickly as long as you maintain good credit habits. But if you rent cars often using a debit card and your credit reports are pulled frequently as a result, the negative impact to your scores would likely be more considerable.