These days, most folks seem to know that a lot of credit cards provide some form of insurance when used to rent a car.
For example, Chase Sapphire Preferred offers primary auto insurance coverage on rental cars via a Collision Damage Waiver.
They even say to decline the rental company’s collision coverage and charge the entire rental cost to your credit card.
Then if you happen to get in a collision, the coverage provided by Chase is primary (before your own car insurance kicks in, saving a lot of headache). They also say theft is covered, which makes it sound more like physical damage coverage.
Loss of use is also included, which is important because car rental companies will claim they’re losing business each day the car isn’t in operation. And that can get expensive.
For the record, there are also limitations to this coverage, such as depreciation to the vehicle as a result of an accident. And liability isn’t included (if you hit someone/something).
So it’s not complete coverage by any means, but it is a start and you might be able to avoid paying for the car rental company’s insurance, which could save some bucks, especially on a lengthy rental.
Be sure to check your credit card’s terms to see if it offers primary or secondary car insurance coverage to determine if you can decline coverage when renting a car.
You’ll need to consider your existing auto insurance coverage as well, assuming you have it.
[By the way, did you know State Farm offered credit cards? Strange, but true.]
Don’t Ding Your…Credit
Okay, so we know credit cards are helpful in terms of bearing some of the potential insurance costs when renting a car.
But a lesser-known secret is that renting a car without a credit card may result in a credit inquiry.
While renting a vehicle isn’t a traditional line of credit, it is an expensive item that the company trusts you with, at least for a couple days.
If you happen to damage the vehicle, it could cost the car rental company quite a bit of money in damages and/or profits.
However, if you rent a car with a credit card the company can rely on that large line of credit to cover any potential losses.
The way they see it, you’ve got credit if and when needed, so there’s no need for them to do a background check.
Conversely, if you whip out your debit card (don’t even bother trying to rent with cash), the car rental company may need to run your credit to see if you’re an acceptable credit risk.
If it turns out you have poor credit, they might ask that you use a credit card to pay for your rental…if you don’t have a credit card, they might tell you that you’re simply out of luck.
In any case, this type of credit check will result in a credit inquiry, which as most people know, can lower your credit score. So it’s not optimal to rent a car with a debit card for more reasons than one.
Keep in mind that you can probably pay for your rental in cash or debit once you return the car, but in order to rent it to begin with credit is king.
Read more: The pros and cons of credit cards.
Wow, good to know. I certainly don’t want my credit run unnecessarily.