You may know this frustration: One Christmas, I scraped together money for a flight home and budgeted enough to cover the $80 to rent a car for the weekend.
But because I was paying with a debit card, I was charged a $350 deposit.
To make that deposit, the company put a hold on my debit card. That meant for the duration of the rental, $350 of my money was unavailable.
Worse, I had to wait about a week and a half after the trip to see the refund available in my bank account. I’m not sure about you, but I don’t usually have the luxury to just give up $350 for a couple weeks!
Renting a car is particularly difficult, because the amount of the deposit can be so high compared to the cost of rental. That’s if you’re allowed to pay with a debit card at all.
These authorizations are understandable from a business’s point of view: It needs some assurance that it won’t lose money if you cause damage or fail to pay what you owe.
When you pay with a credit card, the credit card company ensures you’ll make the payment, and you’re responsible for paying the credit card company.
When you pay with a debit card, a business runs the risk that you could take off or cause damage that costs more than what’s available in your bank account.
But most of us are good, honest people. It’s frustrating to face barriers put in place to protect businesses against dishonest jerks.
Thankfully, I’ve found a way around the dreaded debit-card authorization.
How to Rent a Car Without a Credit Card
Instead of handing over my bank debit card to cover the deposit for a rental car, I use my PayPal debit card.
With this trick, the deposit never leaves my account.
First, you have to have a PayPal Business MasterCard debit card. If you don’t already have one, here’s how to get it:
1. Create a PayPal Account
If you don’t already have an account, go to PayPal.com to sign up for free.
2. Upgrade to a Premier or Business Account
Set this up when you open your account, or upgrade your existing account to Premier or Business.
Be sure to read through the differences between these accounts to know which is best for you. Upgrading to either is free, and they both come with features not available to a personal account.
Basically, if you’ll use PayPal for online business or freelance work, upgrade to a Business account. For personal use with the additional features, Premier should have you covered.
3. Apply for a PayPal Business MasterCard Debit Card
Plan well in advance if you want to use your debit card for a particular trip! If you’re new to PayPal, you’ll want to apply for the Business MasterCard at least three months in advance.
Even if you’ve had a PayPal account for a while, give yourself at least a month.
Note: This is NOT the same as a PayPal Prepaid MasterCard, which is also a physical card you can get from PayPal. The Prepaid card is loaded like a gift card, while the Business debit card works like your bank debit or ATM card.
Even outside of this hack, I love having a PayPal debit card because:
I can pull cash from my PayPal account at an ATM or use it like any other debit card. That means I can make in-real-life purchases with money I make online.
I get instant access to my PayPal funds, which used to take three to four days to transfer to my bank account.
I get 1% cash back for every debit purchase that doesn’t require a PIN.
3. Set Up a Backup Funding Source
Select a backup funding source for your Business debit card. This is a different process from selecting a backup funding source for your PayPal account, so make sure you attach it specifically to the card.
Your backup funding source will be either your checking account or another debit card (or both).
When you pay for something using your PayPal debit card, any funds in your PayPal account are used first. The backup will cover the purchase if the amount exceeds your PayPal balance.
Warning: Your backup will cover a purchase that exceeds your PayPal balance, whether or not you have the funds in the backup account. Watch the balance on both accounts to avoid an overdraft fee.
Renting a Car With a Debit Card
When you travel, use your PayPal debit card to cover your rental car deposit.
Here’s how it works:
1. Deposit $1 Into Your PayPal Account
A few days before you travel, deposit a small amount into your PayPal account. I always stick with just $1.
Depending on your bank, a deposit could take a few days to hit your PayPal account. Mine usually takes two or three days.
If you need it more quickly, you can coordinate with a friend or family member to transfer money directly from another PayPal account, which happens almost instantly.
Make sure you keep the balance low. If you already have a higher balance in your PayPal account, withdraw most of it into your bank account.
Any available funds in your PayPal account will be held for the deposit, so the less available when the card is swiped, the better.
2. Look for a Hold on the Available Balance
When rental car company swipes your card, the deposit will take your available $1.
The authorization will be valid, because the charge sees your backup funding and reads that as sufficient funds for the charge, regardless of your checking account’s balance.
But your checking account will not be charged, because the transaction will not be completed.
You can also subsequently receive payments or otherwise deposit money to your PayPal account and have access to it. That won’t be tied up in the hold.
3. Return the Car and Remove the Hold
When you return the rental car, you’ll pay the rental fee. You can charge it to the PayPal card on file (and, subsequently, to your backup funding source), or if it’s allowed, pay with a different card or cash.
When you return the car, the hold is removed from your card, and you’ll never be out the money from the deposit.
Note that if you rack up any charges beyond the car rental fee, like for smoking in the car or damaging it, your PayPal card and/or backup funding source will be charged.
I don’t recommend charging a deposit to your PayPal that’s greater than the balance in your checking account. You’ll risk overdrafting if the charge for the deposit goes through for any reason.
Where to Rent a Car Without a Credit Card
Renting a car is a tricky process for the, uh, credit-impaired. It’s a big responsibility!
Some companies simply don’t allow you to rent without a credit card in your name. Practically no one will rent to you for cash or check anymore.
But many companies do allow you to rent a car with a debit card — with a few additional caveats.
Most rental car companies will run a credit check, and many will require additional identification, for renting with a debit card (versus a credit card). Check with your rental car company to ensure you show up with all the required information.
You’ll always be required to show a valid driver’s license and your charge card to rent a car.
Additional I.D. required for car rental with a debit card might include:
A return airline ticket or itinerary
U.S. passport or military I.D
Current vehicle insurance card
A copy of your phone or utility bill or bank statement from within 60 days
As of this writing, these companies allow you to rent a car with a debit card:
Alamo (return ticket or itinerary required; no credit check at some locations)
For most companies, you must be at least 25 years old to rent a car with a debit card. But Dollar allows drivers under 25 to rent with a debit card.
FROM THE SAVE MONEY FORUM
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Unless you treat budgeting like a book club and openly discuss your spending habits with your friends, you may not realize you’re overspending — or underspending — in certain categories.
Budget recommendations can help you better assess how you manage your money.
We turned to government sources and industry leaders for those recommendations in four major categories: housing, food, debt and retirement.
These budget percentages — which you can tweak to fit your situation — can help you determine where your dollars should go.
Don’t Spend More Than 30% on Housing
It might be difficult if you’re in a city with a high cost of living and you don’t have roommates, but try to keep your housing expenses under 30%. Government agencies, including the U.S. Department of Housing and Urban Development, consider households cost burdened if they spend more than that.
If your annual income is around $30,000, you shouldn’t spend more than $750 a month on housing. If you make $50,000 a year, your monthly housing costs shouldn’t exceed $1,250. Individuals and families bringing in $75,000 annually can increase their housing spending threshold to $1,875 a month.
Keeping this threshold in mind isn’t just good for your financial well-being; it can also affect your ability to find housing. Leasing agents and housing lenders compare housing costs to your income to determine whether to approve a rental or mortgage application.
Keep Food Costs Between 10 and 15%
Food spending can vary drastically from one household to the next based on family size, dietary needs, food preferences and other factors.
Still, one way to assess your spending is to turn to the United States Department of Agriculture’s monthly food-cost guide, which is based off government recommendations for a nutritious diet and food prices from the early 2000s that have been updated to reflect current dollars.
The guide focuses on costs for food prepared at home. (Don’t include your Uber Eats expenses when comparing your spending to the recommendations.)
The USDA’s chart breaks down food costs in dollar amounts based on four spending levels — thrifty, low-cost, moderate and liberal. It’s further broken down in terms of age, gender and family make-up.
The recommended spending for a moderate-cost plan generally takes up between 10 and 15% of the budget for a middle-income individual or couple.
According to the chart, a woman under 50 should spend $257.20 a month on a moderate-cost food plan. If she made $30,000, that would be about 10% of her monthly budget. A man under 50 on a moderate plan should spend about $302.20, which is 12% of a $30,000 annual salary.
A couple in the same age bracket following the same food plan is recommended to spend $615.30 a month on groceries. If that couple earned a combined $50,000 a year, 15% on their budget would go to food expenses. If they earned $75,000, they’d be spending 10% of their monthly income on food.
Certainly, having kids increases the cost of food. According to the USDA, a moderately-spending family of four should spend $892.40 monthly with children under age 6, or $1,065.20 a month if their kids are between ages 6 and 11. That means a family earning $75,000 a year would spend 14% of their budget on food if they had young kids or 17% if they had older kids.
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Debt Payments Shouldn’t Make Up More Than 43%
Ideally, you want none of your income going toward repaying loans. But if you’re like most American adults, you probably owe money in the form of credit card debt, a mortgage, a car note, student loans or medical bills.
The Consumer Financial Protection Bureau says the 43% debt-to-income ratio is the standard most lenders will use to determine whether a borrower can be approved for a qualified mortgage. Borrowers whose monthly debt payments (including their mortgage) make up more than 43% of their monthly gross income would have a harder time qualifying for a loan.
To think of this budget percentage in real dollars, an individual with an annual household income of $30,000 shouldn’t have over $1,075 in total monthly debt payments. Someone with an annual household income of $50,000 shouldn’t exceed $1,792 per month, and those who earn $75,000 a year shouldn’t put more than $2,688 a month toward paying off debt.
If your minimum debt payments exceed 43% of your income, consider asking creditors for a lower interest rate, refinancing or consolidating your loans or opening a balance transfer credit card with a 0% introductory interest rate. Another option is increasing your income with a regular side gig or second job.
Of course, if you have room in your budget to spend more than 43% of your income in order to make extra payments and get rid of your debt quicker — more power to you!
Aim to Save 15% (or More) for Retirement
Saving and investing in your working years allows you to have money to draw from when you no longer have a paycheck coming in. How much you ought to put aside will depend on a few factors, like age, income level and your estimated cost of living once you hit retirement.
A rule of thumb from investment firm Fidelity is to start saving 15% of your income (including employer contributions) at age 25. If you make $30,000 annually, you should save $4,500 per year or $375 a month. If you have an annual salary of $50,000, try saving $7,500 a year or $625 monthly.
If you’re getting a later start saving for retirement, you’ll need to up that contribution. Fidelity recommends saving 18% if you start at age 30 or 23% if you start at 35.
Our guide to retirement planning outlines what you need to know when it comes to saving for your golden years. And if you’re hoping to retire before the wrinkles set in, check out this article on how to retire early.
Guidance For Your Other Spending
Your monthly spending likely falls into other budget categories as well.
To see what other Americans spend in categories like apparel, transportation, health care, entertainment, personal care, education, insurance and more, check out the U.S. Bureau of Labor Statistics’ annual consumer expenditures survey. Personal finance guru Dave Ramsey also shares popular budget percentage recommendations on his EveryDollar site.
Know that what’s recommended for budgeting — whether it’s from government sources or a trusted personal finance personality — should be seen as a guideline, not as a mandate. A blanket percentage can’t account for everyone’s unique financial situation.
So go ahead and customize your budget as it fits for your life. As long as your budget meets your needs (and allows you to save for the future), you’re doing something right.
Nicole Dow is a senior writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penn [...]
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