Rent a Car Without a Credit Card: Use This Trick to Avoid a Big Deposit
You may know this frustration: One Christmas, I scraped together money for a flight home and budgeted enough to cover the $80 to rent a car for the weekend.
But because I was paying with a debit card, I was charged a $350 deposit.
To make that deposit, the company put a hold on my debit card. That meant for the duration of the rental, $350 of my money was unavailable.
Worse, I had to wait about a week and a half after the trip to see the deposit refunded in my bank account. I’m not sure about you, but I don’t usually have the luxury to just give up $350 for a couple weeks!
Renting a car is particularly difficult because the amount of the deposit can be so high compared to the cost of the rental. That’s if you’re allowed to pay with a debit card at all.
These authorizations are understandable from a business’s point of view: It needs some assurance that it won’t lose money if you cause damage or fail to pay what you owe.
When you pay with a credit card, the credit card company ensures you’ll make the payment, and you’re responsible for paying the credit card company.
When you pay with a debit card, a business runs the risk that you could take off or cause damage that costs more than what’s in your bank account.
But most of us are good, honest people (and responsible drivers). It’s frustrating to face barriers put in place to protect businesses against dishonest jerks.
Thankfully, I’ve found a way around the dreaded debit-card authorization.
How to Rent a Car Without a Credit Card
Instead of handing over my bank debit card to cover the deposit for a rental car, I use my PayPal debit card.
With this trick, the deposit never leaves my account.
First, you have to have a PayPal Business MasterCard debit card. If you don’t already have one, here’s how to get it:
1. Create a PayPal Account
If you don’t already have an account, go to PayPal.com to sign up for free.
2. Upgrade to a Premier or Business Account
Set this up when you open your account, or upgrade your existing account to Premier or Business.
Be sure to read through the differences between these accounts to know which is best for you. Upgrading to either is free, and they both come with features not available to a personal account.
Basically, if you’ll use PayPal for online business or freelance work, upgrade to a Business account. For personal use with the additional features, Premier should have you covered.
3. Apply for a PayPal Business MasterCard Debit Card
Plan well in advance if you want to use your debit card for a particular trip! If you’re new to PayPal, you’ll want to apply for the Business MasterCard at least three months in advance.
Even if you’ve had a PayPal account for a while, give yourself at least a month.
Note: This is NOT the same as a PayPal Prepaid MasterCard, which is also a physical card you can get from PayPal. The Prepaid card is loaded like a gift card, while the Business debit card works like your bank debit or ATM card.
Even outside of this hack, I love having a PayPal debit card because:
- I can pull cash from my PayPal account at an ATM or use it like any other debit card. That means I can make in-real-life purchases with money I make online.
- I get instant access to my PayPal funds, which used to take three to four days to transfer to my bank account.
- I get 1% cash back for every debit purchase that doesn’t require a PIN.
3. Set Up a Backup Funding Source
Select a backup funding source for your Business debit card. This is a different process from selecting a backup funding source for your PayPal account, so make sure you attach it specifically to the card.
Your backup funding source will be either your checking account or another debit card (or both).
When you pay for something using your PayPal debit card, any funds in your PayPal account are used first. The backup will cover the purchase if the amount exceeds your PayPal balance.
Warning: Your backup will cover a purchase that exceeds your PayPal balance, whether or not you have the funds in the backup account. Watch the balance on both accounts to avoid an overdraft fee.
Renting a Car With a Debit Card
When you travel, use your PayPal debit card to cover your rental car deposit.
1. Deposit $1 Into Your PayPal Account
A few days before you travel, deposit a small amount into your PayPal account. I always stick with just $1.
Depending on your bank, a deposit could take a few days to hit your PayPal account. Mine usually takes two or three days.
If you need it more quickly, you can coordinate with a friend or family member to transfer money directly from another PayPal account, which happens almost instantly.
Make sure you keep the balance low. If you already have a higher balance in your PayPal account, transfer most of it into your bank account.
Any available funds in your PayPal account will be held for the deposit, so the less available when the card is swiped, the better.
2. Look for a Hold on the Available Balance
When the rental car company swipes your card, the deposit will take your available $1.
The authorization will be valid because the charge sees your backup funding and reads that as sufficient funds for the charge, regardless of your checking account’s balance.
But your checking account will not be charged, because the transaction will not be completed.
You can also subsequently receive payments or otherwise deposit money to your PayPal account and have access to it. That won’t be tied up in the hold.
3. Return the Car and Remove the Hold
When you return the rental car, you’ll pay the rental fee. You can charge it to the PayPal card on file (and, subsequently, to your backup funding source), or if it’s allowed, pay with a different card or cash.
When you return the car, the hold is removed from your card, and you’ll never be out the money from the deposit.
Note that if you rack up any charges beyond the car rental fee, like for smoking in the car or damaging it, your PayPal card and/or backup funding source will be charged.
Don’t charge a deposit to your PayPal that’s greater than the balance in your checking account. You’ll risk overdrafting if the charge for the deposit goes through for any reason.
Where to Rent a Car Without a Credit Card
Renting a car is a tricky process for the, uh, credit-impaired.
Some companies simply don’t allow you to rent without a credit card in your name. Practically no one will rent to you for cash or check anymore.
But many companies do allow you to rent a car with a debit card — with a few caveats.
Most rental car companies will run a credit check, and many will require additional identification for renting with a debit card (versus a credit card). Check with your rental car company ahead of time to ensure you show up with all the required information.
You’ll always be required to show a valid driver’s license and your charge card to rent a car.
Additional I.D. required for car rental with a debit card might include:
- A return airline ticket or itinerary
- U.S. passport or military I.D.
- Current vehicle insurance card
- A copy of your phone or utility bill or bank statement from within 60 days
As of this writing, these companies allow you to rent a car with a debit card. To make extra sure your trip goes smoothly, you could call ahead to make sure they accept PayPal cards:
- Alamo (return ticket or itinerary required; no credit check at some locations)
For most companies, you must be at least 25 years old to rent a car with a debit card. But Dollar allows drivers under 25 to rent with a debit card.
Renting a Car Without a Credit Card
That was a lot of information to take in, so here’s a simple checklist:
Create or upgrade your PayPal account to Premier or Business.
Apply for the PayPal Business MasterCard Debit Card.
Link a backup funding source to your Business MasterCard.
Keep a low balance (about $1) in your PayPal account when you travel.
Read the payment policies for rental car companies and choose one that will allow you to rent without a credit card.
Swipe your PayPal Business MasterCard for the rental car deposit.
Dana Sitar (@danasitar) is a contributor to The Penny Hoarder.