I recently experienced the *worst* customer service ever from Alamo, the car rental company. My wife traveled to the rental location after having reserved the car on-line with her debit card. When she arrived they told her she could not pay for the car rental with the card she used to reserve it with.
According to Alamo “corporate policy, which has been the same for many years” they will only rent cars on a debit card to “out of town” renters who have a valid return ticket. WHAT?! This is the dumbest thing I have ever heard. They will allow you to rent the car, as a local renter, if you have a credit card.
So I called Alamo customer service at (800) GO-ALAMO (462-5266). They told me that it was for “security reasons”. When I told them this was a dumb answer (I said it in a nice and polite manner) they explained that, “out of town renters were more likely to return the car.” Here’s how the conversation went.
Me: Please explain why what “security reasons” there are for not renting to a local renter with a debit card but you will to an out of town person with a debit card.
Alamo: Well, someone with a return ticket will return the car vs. someone without one may decide that if they can’t pay or don’t have the funds just not to return the car.
Me: So, you the risk is that a local renter using a debit card will not return the car, but a foreign renter from another country will return the car because they have a return ticket?
Alamo: That is correct.
I can not believe that they think someone will actually “not return the car” if they are a local renter and using a debit card vs. a credit card. The customer service person did not understand how credit card transactions work and gave me the wrong answer. The correct answer, IMHO, is as follows.
When a car rental agency rents you a car they do not authorize the car for the full amount as they do not know what the final charge will be. For example, you may return the car without gas and they will need to charge you for refilling the tank. This means that they only authorize the card for a portion of the final bill, which is usually 50-80% of the total charge.
If someone is using a credit card the amount that was authorized will be removed from the available credit in anticipation that a settlement will happen and the car rental place will charge that amount. If the final charge is more than the available credit on the card the charge will still go through as most credit card offer some sort of overdraft protection (for a fee). This is very different on a debit card.
If a debit card has an available balance of $100 and the card is authorized for $90 but the final bill is $150 the car rental place will not be able to charge them as many debit cards are caped at the available balance in the person’s account. If the car rental agency cannot charge the customer they cannot accept the car! This means they need to keep charging the customer daily rental fees until the customer can pay the amount due to the rental agency, which increases daily.
This is a risk for accepting *any* debit card, not just for people who are traveling and have a return ticket. What they are really saying is that people who can afford to fly are affluent and have plenty of money to cover their travel related costs. This is easy to decide as most commercial air travel is done by business people. Alamo is discriminating against local, and in their eyes “poor”, travelers who they think will not be able to pay their bill. This has lawsuit written all over it. Re-read this paragraph again and think about it.
The problem is that the car rental company authorizes the card for a dollar amount much smaller than they knew they would charge the customer, during settlement. Since they know this, they can mitigate the risk by authorizing the card for a much higher amount such that they know will cover the final balance. So why don’t they do this? It is an inconvenience to the cardholder and in their mind something that will cause their affluent customers to become upset when they find out that a large authorization has allocated their funds. Instead, Alamo decides to hedge their bets and just deny local debit card use.
I checked the Alamo web site which states that *no* debit card of any type will be accepted for payment, which contradicts what the rental agency permits in practice and what I was told by the customer service representative:
Alamo does not accept debit cards at time of rental. Although a debit card may be accepted online, you will not be able to process your transaction at time of rental.
Here are the US and UK policies on use and acceptance of a debit card. The US policies:
When renting in the U.S., debit and check cards may only be used in conjunction with proof of a round trip travel ticket (airline, cruise ship or train) at time of rental.
For pick-ups in the United States, without proof of roundtrip ticket, debit or check cards are only accepted when returning the vehicle.
The UK policies are much more reasonable.
Debit cards can not be used as a deposit at the beginning of the rental, and can only be used for payment when returning the vehicle.
This shows that I am correct in that the problem resides between the authorization and settlement, and that car rental agencies still discriminate against locals.