|Subject: Credit card deposits on overseas car rentals|
Hello all Ziners,
A cautionary tale for you all on a relatively unknown peril
of credit cards:
I recently rented a car (from Enterprise) while visiting UK. If you decline insurance (which I did, as I'm covered on my credit card and home car insurance) they take a 'security deposit' (fully refundable) on the credit card. And the amount was refunded (to the card) on return, by netting out against the valid charges. BUT, the charge and the refund came through separately and both halves are charged the 'administration fee' of 2½% (most credit card companies charge a rate similar to this) meaning a MUCH higher charge than I anticipated.
[I know this is confusing, so I'll use actual numbers to show the effect: Enterprise charged £297.61 up front (deposit of £250 plus estimated rental cost of £47.61). Actual rental cost was £37.60 - car returned early. Credit issued for £260.01 (297.61-37.60). Exchange rate to sterling was 2.26547 for the £297.61 Exchange rate to sterling was 2.26236 for the -£260.01 I figure I 'should' have paid Cdn 85.18 (£37.60 @ 2.26547) before service charges. Credit card company charges 2½% on $85.18 (or $2.13) for total of $87.31.
HOWEVER: The actual administration fee is charged on ALL transactions (both credits and debits attract a commission) so actual charges were: £297.61@ 2.26547 = $674.23 + 2½% ($16.85) Total $691.08 -£260.01@ 2.26236 = -$588.24 + 2½% ($14.71) Total -$573.53. So my net charge was $117.55 (691.08-573.53) instead of the anticipated $87.31.
The credit card company ended up charging total administrative fees of $31.56 (16.85 + 14.71) on a net 'purchase' of $85.18, instead of the anticipated $2.13.]
OK. I may have confused everybdy with the details, but the learning here (apart from how banks make lots of money) is to be very careful about allowing 'deposits' to be taken on credit cards if they involve a subsequent refund (no problem if you actually incur the expense). To prevent this INSIST that the vendor 1. Reverse out the original deposit amount, then 2. Charge the correct amount separately.
The banks' computer systems 'may' be clever enough to offset identical debits and credits. But even if they aren't at least you can explain to them that the credit and debit EXACTLY offset each other (and a good company will adjust appropriately). If they are netted, most reps will have difficulty going through the logic above (to say nothing of the consumer).
Of course, some may think that 2½% 'administrative fee' is usury anyway (so don't use credit cards overseas) but it's certainly far better than $31.56 vs $2.13 (which I eventually had reversed).
Happy (economic) travelling, Alan Gardner