Debit or Credit Card: What’s the Best Choice for Car Rentals?

When renting a car, using a credit card is typically more advantageous than a debit card due to added benefits like rental insurance coverage and potential rewards. This article explores the types of insurance coverage offered by major credit card networks, restrictions on coverage, and the differences between primary and secondary insurance. By understanding these factors, you can make an informed choice that aligns with your financial goals and maximizes the benefits of your rental experience.

When paying for services, you might think there’s not much difference between using a debit card or a credit card. However, when it comes to car rentals, credit cards often provide added perks that can make a big difference—such as rewards points and valuable car rental insurance. These benefits give credit cards a distinct advantage.

If you’ve ever rented a car and had to pay extra for collision damage insurance, you know how costly it can be. Rental companies typically charge around $27 per day for this coverage. By using a credit card with rental insurance benefits, you can often avoid this fee entirely.

Key Takeaways

Many credit cards include rental car insurance, saving you from having to purchase expensive per-day insurance.
Debit cards generally do not offer these same benefits.
Always check the terms of your specific credit card for detailed coverage limits and conditions.

Credit Cards with Car Rental Coverage

Car rental insurance benefits are tied to the credit card network, not the bank issuing the card. Visa, Mastercard, and American Express all offer some level of rental car insurance coverage. To activate this coverage, you’ll need to pay for the entire rental with your credit card and decline the rental agency’s collision damage waiver (CDW).

Credit card rental insurance generally falls into two categories: primary coverage and secondary coverage.

Primary vs. Secondary Coverage

Secondary Coverage: Most credit cards, including those from the three major networks, provide secondary coverage. This type of coverage works with your personal auto insurance, covering your deductible and possibly extra costs like towing or loss of use while the rental is being repaired. Before relying on secondary coverage, verify with your primary insurance carrier that rentals are included.
Primary Coverage: Select credit cards offer primary coverage, which is useful if you don’t have personal auto insurance or if your policy doesn’t include collision and comprehensive insurance. This coverage can take care of damages without needing to involve your own insurance provider.

Restrictions on Coverage

Credit card rental insurance comes with certain restrictions. For example, most cards don’t cover high-end or luxury vehicles (valued over $50,000), full-size vans, trucks, or off-road vehicles. American Express, in particular, limits coverage on SUVs to specific models.

Typically, coverage is valid for up to 15 days for domestic rentals and 31 days for rentals abroad. Roadside assistance may be available for an extra fee, depending on the rental company.

Only cardholders or authorized users are generally covered, so if you plan to share driving duties, make sure additional drivers are either cardholders or added to the rental agreement. You’ll also need to file any claims within a specified timeframe, as waiting too long could result in loss of coverage.

If your credit card and personal auto insurance don’t provide sufficient coverage, consider a short-term car insurance policy. This temporary insurance can provide the extra protection you need.

Top Credit Cards with Primary Car Rental Coverage

Here are some credit cards that offer primary rental car insurance:

Chase Sapphire Preferred Card: This card provides primary insurance that covers theft and collision damage up to the car’s cash value for rentals in the U.S. and internationally. Additionally, Chase Sapphire rewards you with 2X points on travel expenses, including car rentals, flights, and hotels, and 3X points on dining purchases.
American Express Cards: Although Amex generally offers secondary rental insurance, they do have a primary option. For a flat fee of $19.95 to $24.95 per rental period (not per day), you can get primary coverage up to $100,000 for vehicle damage or theft, along with additional benefits for accidental death, medical expenses, and personal property. For frequent travelers, the Amex Gold Card offers further perks like 4X points on U.S. dining and supermarkets, along with a welcome bonus of 90,000 points for new cardholders who meet the spending threshold.

Important: Always Read the Fine Print

It’s crucial to understand the specifics of your credit card’s rental insurance policy. Credit card insurance coverage can be complex, requiring coordination between your credit card issuer, rental company, and personal auto insurance provider if you need to file a claim.

Some details that could void your coverage include using the rental for business purposes, or renting in certain countries (like Ireland, Italy, Israel, Australia, and New Zealand) where coverage is often excluded. Always review the terms of your card’s rental coverage carefully before you rent.

Is a Credit Card Better than a Debit Card for Car Rentals?

Visa, Mastercard, and American Express all offer rental insurance benefits, meaning you can decline the rental agency’s collision damage coverage if you pay with a credit card. On the other hand, debit cards typically don’t offer this insurance, and paying with a debit card may require you to pay for additional coverage or leave a larger security deposit.

Is Renting a Car with a Credit Card More Cost-Effective?

Yes, using a credit card is usually more economical. Credit card rental insurance can save you from purchasing the rental agency’s collision coverage, which can add up over several days. Additionally, rewards cards allow you to earn points, cash back, or other perks on car rental transactions.

How Much Will a Car Rental Company Hold on a Card?

Rental companies often place a hold of several hundred dollars on your card. For credit cards, this hold doesn’t impact your bank balance, as it’s simply a hold on your available credit. However, with debit cards, this hold affects your available funds directly, reducing the amount in your bank account until the hold is released.

The Bottom Line

When renting a car, using a credit card is generally a smarter choice than using a debit card. With credit cards, you’ll benefit from included rental insurance, earn potential rewards, and avoid large holds on your bank account. Always double-check your coverage details with both your credit card provider and personal insurance carrier, so you’re fully prepared. This can help you avoid unexpected costs and enjoy a hassle-free rental experience.