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Why do you need a credit card to rent a car?

7 min read

Why do you need a credit card to rent a car?

Written By

Ryan Severance
Ryan Severance

Rounding it up

  • Rental services require credit cards as collateral to ensure the safe and sound return of borrowed cars.

  • Credit cards are also used to pay for incidental fees, or unexpected costs.

  • Some merchants accept prepaid credit cards (like your KOHO Mastercard) as valid forms of payment.

  • Always read the entirety of rental agreements to avoid unnecessary charges.

Got a summer road trip coming up? Maybe you want to drive to the countryside, cruise along city streets, or visit tourist locales. You’ll find that renting a car is the best way to take in the sights without having to rely on public transportation—or lack thereof. There are a number of requirements that must be met in order to rent a car in Canada, one of them being access to a credit card.

Why exactly do you need a credit card to rent a car, and what should you expect when you first visit a car rental agency to pick out a temporary vehicle? Review this guide to ensure your financial documents are in order when trying to rent a car.

Cars are major investments

Purchasing your own automobile can be an expensive process, especially when you factor in the maintenance costs and gas prices which you’ll have to deal with as a car owner. It should then come as no surprise that car rental services don’t want to part ways with their automobiles until you can convince them that you have an established credit history and the ability to pay them back. Rental services which agree to loan you a car are taking a major risk, so you need to prove that you’re a sound investment to secure the ride of your choice.

That’s where credit cards come in handy. They’re a common prerequisite to renting a car because it proves you’re a trustworthy individual with the financial means to take care of a car. It also illustrates that you have a history of paying back your debts and can afford any incidental charges that may arise in the course of your rental period.

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What’s the problem with cash?

Some tourists and travelers believe that they can reliably use cash to rent cars, though the vast majority of rental locations will refuse cash payments for security purposes. While renters may be able to pony up enough cash for the initial rental cost of a car, cash won’t be able to cover incidentals that could arise during the rental process. Rental car services thus avoid cash payments to avoid losing money if the car is stolen, returned late, or damaged in an accident during the rental period.

The good news is that there are other ways to rent a car. For example, some car rental agencies might accept debit cards. You can use your KOHO card to rent cars, though not all rental franchises may accept payment in the form of a reloadable prepaid Mastercard. Most will only accept prepaid credit cards as payment at the end of a rental agreement. That means you can initially book a car with a traditional credit card before, then pay off the bill in full with a prepaid Mastercard at the end.

Additionally, merchants often put pre-authorization holds on a credit card used to rent a car; a pre-authorization hold freezes a certain percentage of your card’s money to ensure that you maintain a high enough balance to pay back what is owed to the rental car’s owner. As a standard security measure, pre-authorization holds on credit cards usually last for approximately two weeks after the purchase, though this may vary depending upon the rental agreement.

Prepaid Mastercards can generate steeper pre-authorization holds, which can be annoying to deal with. Savvy drivers can avoid the hassle of a pre-authorization hold by using a credit card instead of a prepaid Mastercard, even if they ultimately pay back what they owe using the prepaid Mastercard. If you do this with your KOHO card, you could avoid the steep pre-authorization hold, but still make cash back on your final bill (which could be as high as 2% if you have an Extra account).

Understanding incidental fees

Individuals looking to rent a car with the help of a credit card must understand incidental fees to avoid steep financial charges. Incidental fees, usually just called incidentals, refer to the amount of money you must pay if the car is damaged by accident or mischance during the rental period; if the car is scratched in a parking lot or totaled in a serious collision, incidentals will be accumulated to repair or replace the vehicle.

If you’d like to avoid these unforeseen, costly expenses (who wouldn’t?), understand that incidentals can be avoided through safe driving practices. Rental cars cannot be treated like toys that someone else must care for – failing to take adequate care of a rental will result in drastic fees which will be automatically charged to the card used to secure the rental in the first place. This is a major reason that rental car services require a certain amount of money and a minimum age before letting consumers access their services.

Airport charges such as concession recovery fees are frequently incurred as incidentals as well. Also frequent are gasoline charges if you return the car with an empty tank. You could also incur early return fees, excessive mileage fees, and cleaning fees depending on the fine print of the rental agreement. If you’re touring a new place, always look out for weird rental fees that you may need to pay according to local ordinances.

What do you need to rent a car?

Those who look to travel across Canada will need several documents to rent the car of their choice. First and foremost, understand there’s a minimum age requirement of 21 to rent a car across all of Canada. Rental agencies will often use a valid driver’s license to determine whether you meet the minimum age requirement. In addition to the age requirement, drivers who are within the 21-24 years old age bracket may be required to pay higher initial deposits to rent a car than older, more experienced drivers. Younger drivers usually have less established credit histories, which factors into this additional financial hurdle.

Certain rental services may require the renter to show a passport and return airline ticket if they’re from abroad. This convinces the rental services that the car will indeed be returned at the end of the agreed-upon rental period. Finally, a valid credit card (or valid prepaid credit card in some cases) will be necessary in most circumstances. It’s imperative to remember that the credit card and driver’s license used to rent a car be in the same name.

Virtual credit cards are seldom accepted by rental car services. Any type of “single-use” card will likely be an invalid method of payment for security purposes. For younger drivers seeking to rent a car, hefty deposit fees are almost always guaranteed. Nevertheless, building a strong credit score will help convince rental services and other lenders (such as banks) that you’re a trustworthy individual who may not need to pay such steep fees.

KOHO Signup Link

How to get the most out of your car rental

Now that you know what you need to rent a car, follow these tips to get the most from your car rental and save money in the long term.

Find the right car for the job

Plan your trip carefully to avoid getting the wrong car; long-hauls across the country should be managed with a rental car that has excellent gas mileage. Small economy cars are useful in cities, where parking may be difficult, whereas pickup trucks are popular with those cruising through rural areas with gravel roads. Driving the northern gravel highways of Canada is best done in a rugged vehicle that won’t scratch easily and generate an expensive incidental fee.

Consider whether the trip in question requires a vehicle with 4 Wheel Drive (4WD) or All Wheel Drive (AWD). Drivers who are looking to rent a car during the winter may wish to invest in a rental option that possesses a AWD system because they can more capably deal with deep snowdrifts. Additionally, consider your cargo; renters may be obligated to bring a child seat if they’re traveling in a rental car with children under 18 kg.

Avoid accidents and unnecessary fees

Drivers should exercise extreme caution when operating an unfamiliar rental car. Particularly if you’ve rented larger cars and trucks; they can be more difficult to park and drive around than smaller commuter vehicles that many are used to. Additionally, your rental car may have a different gas mileage; pay close attention to your fuel gauge and learn the different ways to refuel rental cars before heading out to avoid being charged extra for bringing the rental back with a near-empty tank.

Worried about being charged for damage to a rental car that you didn’t cause? Take pictures or a video of the car’s condition before leaving the lot for the first time. With photographic evidence in hand, you can dispute any charges related to vehicle damage you weren’t responsible for. Finally, always receive written or digital confirmation from your rental service that the car has been returned at the end of your rental period.

With a credit card and these tips in hand, you’ll be traveling across Canada in a rental car with peace of mind soon enough.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

Ryan Severance

Ryan Severance is a professional freelance author and the owner of American Scribe LLC. With degrees in political science and socio-legal studies, he writes about business, politics, and law for clients around the world.



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