Well the whole credit/lending part isn't even needed. In Europe this is only a marginal thing and most people just have debit cards.
Also, some businesses, such as car rental companies, won't provide services to debit card holders.
Also, it's a free [edit: zero-interest, not free] loan (if you pay credit card bills in full); you get some small marginal revenue from the money you keep for up to a month.
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.
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.
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.
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.
In America, yes. Not really a thing in Europe, at least not in any places I’ve been to.
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.
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?
The issuer can also sell that debt (daily rental up to car value) to a debt collector.
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.
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…
That said, you’d think they’ve considered exceptions based on your passport?
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.
Of course if you do that anywhere else, you have to restart the flow.
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.
[1] https://www.statista.com/statistics/968220/credit-card-owner...