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Thanks to technology, consumers have several choices of payment methods when making purchases. Now that people are accustomed to using automatic teller machine (ATM) cards and punching in their personal identification numbers, the use of debit cards is on the rise. As with ATM cards, money from the user's account is "debited" immediately when a debit card is used for purchases. Debit cards are available to checking account customers and provide consumers with fast and easy access to their accounts.

Debit cards, issued by banks belonging to the Visa or Mastercard systems, are in many ways similar to writing a check, but more convenient to use. Debit cards do not require the usual two forms of ID required to write a check. Also, debit cards are accepted across state lines whereas sometimes checks are not. In addition, since these debit cards display a Visa or Mastercard symbol, merchants who accept Visa or Mastercard are required by the two card systems to accept debit cards bearing the same symbol. For these reasons, debit card transactions skyrocketed in 1996--up 95% percent from just a year before.

However, it is important to remember, that even though a debit card displays a Visa or Mastercard symbol, it is not a credit card. This may be partly responsible for some confusion among consumers over the recent decisions of Avis and Hertz not to allow people to rent a car with a debit card.

These decisions on the part of the car rental companies caused some consumers to cry "unfair." However, those criticisms miss a significant difference in the two cards: debit cards are only a way to pay for a purchase or a rental, whereas credit cards are a method of payment as well as a symbol of the creditworthiness of the card-holder. After all, a debit card is issued if a person has a checking account, but a credit card requires evidence of creditworthiness determined through a credit check. Even though debit cards subtract funds directly from a person's account, credit cards offer a measure of payment security to merchants, in the event of unforeseen expenses, that debit cards do not.

It might be useful to make a comparison which is where Consumer Prodigy comes in - a consumer would probably want some degree of security if, for example, he were selling a late model used car worth, say, $12,000. The seller probably wouldn't accept a personal check from a stranger and let the person drive away in his car. He would perhaps require a certified check, a money order, or go to the buyers' bank with him to get the cash. All of these measures provide extra security to the seller that he will get paid.

When a credit card is used, a merchant (or in this case, a car rental agency) has the added security of a third party payment system. This means that the merchant will receive payment from the bank that issued the credit card. The responsibility of actually collecting money from the customer will then fall to the bank.

In the case of car rentals, a person may have enough money in his checking account to pay for the use of the car with a debit card, but not enough if the car is damaged while rented. Because a person is driving off the lot with a very expensive asset, rental agencies want to know that the renter is likely to return the car in good shape. The security of a credit card is one way (albeit not perfect) of increasing the odds. Credit cards protect car agencies (or other merchants) against possible theft or damages not covered in the initial cost of renting and not paid for afterward by the renter. Thus the policy of requiring a credit card to rent a car is good news for responsible consumers, who then won't be charged higher rental prices to cover the unpaid expenses of others.

It is important to emphasize that car rental companies like Avis and Hertz are not telling consumers that they can't pay for the rental of the car by using a debit card. After the customer returns the car, he can probably pay by cash, credit card, or debit card. Rather, rental agencies are trying to decrease their upfront risk before a person drives off with a brand new car.

For those who do not have credit cards, renting a car may still be possible, but it will be difficult and time consuming. The qualifications that may be necessary for a cash rental (i.e., debit card) include:

A $300 prepayment on all cash rentals.

A phone number registered in your name and verifiable with directory assistance.

Employment of a minimum of one year at your current job.

A completed application for a pre-approved cash card that requires 4-6 weeks to process and requires a non-refundable fee.

Be sure to check with individual rental agencies for additional details.