There are some benefits, but it does complicate the transaction significantly. It's no longer between two parties (a consumer and a merchant), there are now at least two more: a lender and a credit bureau.

And that's why we're in this mess to begin with. Credit card transactions are reported to credit bureaus (from a quick web search, it looks like debit card transactions aren't) and this normalizes the idea that your financial data should be shared freely amongst finance companies.

There's really no such thing as a free lunch, or a free loan. When someone offers you one, it's good to understand how you're going to be paying for it.

Good points, especially the last one.

> It's no longer between two parties (a consumer and a merchant)

A cash transaction is between 2 parties. A debit card transaction is between 5: consumer, consumer's bank, merchant, merchant's bank, payment network/card provider.

Credit reporting makes getting loans easier because lenders are more willing to give loans when they can look up your credit rating instead playing it safe and declining you because they have nothing to judge the risk with.

You also get fraud protection.

It’s not free, but you’re not necessarily paying for it. The main concern is that some people are definitely paying for it disproportionally more than others.

I would disagree, as things stand, getting a loan is easier if you have a good credit rating, but it is a deformation of the space.

If there was no credit reporting, the lender would still need to loan just as much. They would base their decisions on other factors (down payment, wages, employ stability, assets, ...) rather than the extremely invasive credit rating.

> Also, some businesses, such as car rental companies, won't provide services to debit card holders.

In America, yes. Not really a thing in Europe, at least not in any places I’ve been to.

I've always wondered about this. You drive off with a EUR30k car. What do they do if you don't come back? Drain your bank account of 500 Euros? What then?

In the US, the rental agreements let them keep charging you the daily rental fee until the amount collected exceeds the value of the car.

Well, what do they do if you drive off with the car and they have your credit card?

Your issuer is only liable for the few hundreds of dollars that the rental car company has authorized; beyond that, it's still their (or their insurance's) loss.

The only practical difference is that you're not out that money on your checking account for a few days, which can indeed be inconvenient – but arguably that's not really the rental car agency's problem?

Couldn't the rental car company keep charging the card and the issuer remains liable for further amounts?

Exactly this.

The issuer can also sell that debt (daily rental up to car value) to a debt collector.

Not if the issuer declines the authorization, and just closing the card (or even just temporarily locking it in the app for many cards!) would do that.

It probably has nothing to do with getting the car back.

It’s probably to avoid lending the car to higher risk demographics.

It’s a test.

The rental car company basically loses fewer cars overall and thus has lower insurance premiums, and thus can offer cars cheaper than other rental companies that do not require a credit card (if any even still exist?) that have higher premiums to pay.

That’s the most likely theory as far as I can tell: While a credit card doesn’t make it more likely to get the money back in case the customer does run away with the car, it’s probably less likely for high-risk customers to even have a credit card.

Which unfortunately creates all kinds of false-positives, like making it very hard for tourists from countries where credit cards are not commonly used to rent a car…

It does but I assume the loss of business from foreign customers still is less than the cost of losing cars.

That said, you’d think they’ve considered exceptions based on your passport?

Call the police and report it stolen is my understanding. I’ve never rented a vehicle in another country, but the handful of times I’ve rented a van to move house, the place has asked for two forms of ID. So they definitely know where they (or the police, I suppose) can find me.

> Also, some businesses, such as car rental companies, won't provide services to debit card holders.

I think most debit cards, at least in the US, can also be authorized on the credit rails, and can therefore be used to rent cars. It's always worked for me.

How does that work? Do you tell them it's a credit card?

Sometimes the terminal will ask Debit or Credit, sometimes it will just prompt for a PIN (meaning it wants to run it as debit) and you can just hit OK and it will run it as credit instead.

Annoyingly, Home Depot makes you press "Cancel" at the PIN prompt, and then it automatically runs it as credit.

Of course if you do that anywhere else, you have to restart the flow.

When I opened my checking account at Bank of America I was issued a ordinary debit card. After a couple years they replaced it with one with a Visa logo. I argued with them on the phone long enough to get them to replace it with an ordinary debit card. After than one expired they did the same thing and I gave up. I haven't seen a debit card from any bank without visa or mc in a long time.

> Also, some businesses, such as car rental companies, won't provide services to debit card holders.

This almost ruined our vacation. I didn't have a drivers license and my SO didn't have a credit card. I've never had any issues renting cars here in Norway, both with credit and debit card, despite not being the driver.

But not in the US, no no! Credit card had to be on the same name as the drivers license.

And so we stood there, just having exited the plane, our two week vacation turning to dust in our minds as a car was most definitely needed.

After some desperate attempts by us at finding a solution, the manager came by, having noticed the commotion. After some thinking she asked where we stayed. We had rented a place through Airbnb, which turned out to be the solution. Using the zip code from that place, she could register the debit card, and we finally got a rental.

In the UK you also get access to better consumer protection using credit thanks to Section 75