How Car Rental Companies Can Combat Credit Card Chargebacks

Table of Contents

1. No-Show Car Rental Customers
2. Car Rental Customers Who Won't Pay for Damage
3. Car Rental Customers Who Won't Pay for Fuel or Tolls
4. How Can Car Rental Merchants Prevent and Fight Chargebacks?
5. Building a Chargeback-Resilient Company

The car rental industry operates in a uniquely complex payment environment. Transactions can be initiated online, fulfilled in person, and finalized days or even weeks later—sometimes with additional charges applied after the vehicle is returned. While this model is essential to effective fleet management, it also creates friction that can lead to disputes and, ultimately, chargebacks.

Unlike many other verticals, car rental merchants regularly deal with variable pricing, conditional fees, and post-transaction billing for things like damage, fuel, tolls, or missed reservations.

Even when these policies are clearly disclosed, customers may still be caught off guard by charges that don’t match their initial expectations. In those situations, it’s increasingly common for cardholders to bypass the merchant entirely and dispute the transaction with their issuing bank.

For car rental companies already managing tight margins and high operational overhead, an unmanaged chargeback problem can quickly increase bad debt and erode profitability.

Understanding why these disputes occur and how to respond to them effectively is critical. In this article, we’ll examine the most common sources of friendly fraud chargebacks in the car rental industry and outline practical strategies merchants can use to prevent disputes and recover lost revenue.

No-Show Car Rental Customers

One of the most common reasons for chargebacks in the car rental industry is that users pay in advance, don’t collect the car, and then claim that they never actually made the booking when disputing the charge with their bank.

It's common practice across a range of industries for customers to pay in advance for a service which will then be charged to their account whether they use the service or not. When booking a hotel, reserving a flight, or booking a rental car, most companies require full or partial payment in advance or reserve the right to process either the payment or a cancellation or no-show fee if the customer doesn't pick up their rental.

Between 20% and 30% of customers who make a rental car reservation never follow through with the rental, which is one of the reasons many rental companies started asking for payment upfront and adding cancellation and no-show fees. Leading companies like Hertz have clear policies in regards to cancellations, changes, and no-shows.

Effective fleet management requires reserving specific cars for users which meet their budget and size requirements. When users reserve a car then fail to collect it, it puts the rental agency at a loss, since they could have rented the same vehicle to another customer.

According to the policies of the major card networks, car rental companies are within their rights to process a payment if a customer does not show, assuming that this policy is clearly stated in the terms and conditions the customer agreed to. When faced with an illegitimate chargeback for this reason, rental companies should represent the charge.

Compelling evidence for these cases would include a copy of the rental agreement highlighting the clause which allows the charge, as well as proof that the customer acknowledged these terms when they made the booking.

Unfortunately, customers seeking a chargeback for an illegitimate reason often lie to their bank about why they want to dispute the charge. In these cases, merchants must provide evidence disproving whatever claim the customer made.

The most common false claim is that the charge wasn't authorized. In order to disprove this claim, merchants should provide records of any identity verification they conducted, such as CVV and AVS matching. Many anti-fraud tools can provide additional evidence to prove the customer's identity, such as IP address, location data, and device fingerprinting.

Car Rental Customers Who Won't Pay for Damage

Damage-related disputes are among the most contentious chargeback scenarios car rental companies face. Even when damage policies are clearly outlined in the rental agreement, customers who declined additional coverage often push back hard once a post-rental charge appears on their statement, making these transactions a frequent source of friendly fraud chargebacks.

To protect themselves from illegitimate chargebacks in the event of damage to the car, rental agencies should be sure that the client understands their coverage, verifying that they've read the conditions either in person or digitally.

When damage does occur, the merchant should notify the customer via email within 1 week at most of the customer returning the vehicle. The notification should outline the damages with photographs as evidence. Once the damage has been repaired, the customer should be sent an invoice listing the cost and several payment options to choose from. Invoices and receipts for the damage repairs should also be saved for future reference.

If there is no response from the customer, the rental company should go ahead with billing their registered credit card after mailing the client information about the charges. All of this correspondence should be saved digitally, along with evidence of the signed contract and photographs of the damage. If the customer disputes the charge with their bank, this documentation can be used to fight and reverse the chargeback.

Car Rental Customers Who Won't Pay for Fuel or Tolls

Refueling is often a contentious issue. Most companies offer competitive gas refueling prices, and for those clients who want to fill up themselves before drop off, companies such as Thrifty allow customers to present a receipt proving that the gas station was within ten miles of the rental car lot. Other companies will instead simply waive refueling costs under a certain amount.

In the age of Uber and Lyft, it can be easy for rental customers to simply forget that they're responsible for gas charges. They might then balk at the extra charges on their account and file a chargeback.

Rental agencies should make sure that refueling policies are clear in their terms and conditions, and notify the customer within one week at most of the vehicle being returned of any fuel expenses that will be charged to their account. Notifying the customer in advance of the actual charge will reduce the chances of chargebacks from customers who were unpleasantly surprised.

The same goes for toll charges. Many car rental companies offer electronic toll payment services that allow users to automatically add any tolls to their rental bill. This makes it easy for renters who use electronic toll roads during their journey. The rental company pays any tolls accrued throughout the duration of the contract and then bills the user separately once the car has been returned and the account is being settled.

To reduce the likelihood of misunderstandings, rental agencies should remind clients that they are liable for tolls and refueling charges when they receive the keys or email them with this information if the key drop is unmanned. As previously discussed, it's always a good idea for rental agencies to email the client with details of the charges before they bill the card on file.

In order to fight chargebacks successfully, merchants should ensure that their records of a customer consenting to the rental agreement are as unambiguous as possible. For online reservations, for example, standard practice is to include on the checkout page a link to the terms and conditions with a checkbox next to it.

Merchants who want to make an extra effort to minimize chargebacks, however, might create a page in the checkout process that features a few simple bullet points outlining common points of confusion in addition to a link to the full agreement. That might dissuade some customers from claiming they never agreed to any extra charges.

One rental company started having customers initial next to key clauses in the agreement when picking up the car, such as charges for damage , fuel, and tolls. Having this additional evidence that the customer agreed to the potential charges resulted in significant improvements in revenue recovery for these cases.

There are additional challenges related to authorization chargebacks in the car rental industry. These chargebacks require their own set of strategies for prevention and recovery, due to the complex interaction of card network rules and payment capture methods. Take a look at our earlier article on the subject for details.

Building a Chargeback-Resilient Company

Chargebacks are not an unavoidable cost of doing business in the car rental industry—they’re a controllable risk. But controlling that risk requires discipline, consistency, and a willingness to treat disputes as a business process rather than a customer service afterthought. Every rental agreement, authorization, and post-rental charge is an opportunity either to reinforce trust or to create friction that later shows up as a dispute.

The most effective rental companies recognize that success depends on whether a charge was properly disclosed, documented, and executed according to network rules. Strong internal processes, supported by clear customer communication and reliable recordkeeping, shift the balance of power back to the merchant.

Merchants that invest in transparency, smarter payment workflows, and proactive dispute management will be far better positioned to protect revenue without sacrificing customer relationships.