It’s natural to wonder whether you can use a debit card to build your credit. After all, you probably already know that credit cards build credit, and debit cards look almost exactly like them. You use them in essentially the same way, and they’re often provided by the same institutions, such as banks.
Unfortunately, the answer is that you can’t use a debit card to build credit. If you want to improve your credit score, you’ll have to get a real credit account instead.
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Do debit cards affect your credit score?
No, debit cards don’t affect your credit score, which is why using one won’t build your credit. On the plus side, you also can’t damage your credit by using one irresponsibly. Debit cards have no effect on your credit whatsoever, either positive or negative.
This is because, unlike credit cards, debit cards aren’t considered credit accounts at all.
Why debit cards aren’t a type of credit account
It might seem counterintuitive given how similar credit and debit cards look, but they’re actually very different tools.
When you use a credit card, you’re making a purchase with the understanding that you’ll pay it off later. Credit cards are considered a type of credit because they involve borrowing money—the defining characteristic of credit.
In contrast, when you use a debit card, you’re not borrowing anything. The money that you spend comes out of your checking account immediately. Debit cards aren’t tools to help you borrow money—they’re tools that let you spend money you already have.
Only credit accounts affect your credit score
Because your debit card isn’t a credit account, it won’t appear on your credit report. This means that lenders won’t see a record of your debit card use when they check your credit history, and it won’t affect your credit score.
This policy makes sense, when you think about it—after all, your credit score and credit report are supposed to reflect your creditworthiness, or how reliably you pay back your debts. Since you don’t have to repay the money that you spend on a debit card, it doesn’t suggest anything about how you’ll handle debts you incur in the future.
When should you use a debit card vs. a credit card?
Since you can’t build credit with a debit card, is there ever a reason to use one over a credit card?
It’s true that credit cards come with several perks that debit cards don’t have. That said, there are several reasons why you might want to opt for debit instead of credit, at least some of the time.
Why should you use a debit card?
Using a debit card is simpler than a credit card. When you use one, the transaction is completed immediately, in contrast to credit cards, which you have to remember to pay off later. If you have a lot on your plate, the simplicity can be attractive.
Additionally, debit cards enable you to:
- Stay out of debt: If you know you tend to overspend on credit and rack up too much debt, sticking to debit cards might help you avoid the temptation to spend money you don’t have.
- Avoid paying interest: When you use a credit card, you have to pay interest (extra charges) on your purchases unless you pay your credit card back in full each month. If you’re not confident that you’ll be able to stay on top of your bills, you can use a debit card to avoid this issue.
Basically, if for some reason you’re not confident you’ll be able to use a credit card responsibly, a debit card is a decent alternative. In this way, they can actually protect your credit—misusing a credit card is actually worse for your credit score than not using one at all.
Why should you use a credit card?
You’ll usually get more benefits from using a credit card, assuming you don’t neglect to pay your purchases off on time. You can use a credit card to:
- Improve your credit: As you know, unlike a debit card, you can use a credit card to build your credit by making regular purchases and paying them off promptly. Responsible credit card use is one of the best and easiest ways to achieve a good credit score.
- Earn rewards: Some credit card issuers offer rewards when you use their cards, such as credit card points or airline miles. If you get a decent rewards card, buying things with your credit card can get very lucrative.
- Protect yourself: In some ways, using a credit card is safer than a debit card. If a seller overcharges you (or someone steals your card), you can dispute the charges with your card issuer. In contrast, since debit cards draw on your checking account immediately, it’s harder to fight fraudulent charges.
How to build credit if you don’t have a credit card
If you’re looking into debit cards because you think you can’t qualify for a credit card, there’s good news. Although debit cards can’t build credit, there are other credit-building methods that don’t require a credit card.
For that matter, you shouldn’t give up on getting a credit card just yet. There are credit cards for people with bad credit and even some cards that are available to people with no credit score at all.
Here are several ways to build credit if you don’t currently have a credit card:
Become an authorized user on someone else’s card
If you can get a family member or friend to add you as an authorized user on their credit card, you’ll get a lot of the benefits of having a card of your own.
You’ll be able to use the primary user’s line of credit (in fact, you’ll often get a physical card as well).
More importantly, being an authorized user can boost your credit score. Many card issuers will immediately add the cardholder’s positive payment history on the card to your own credit report, which can quickly improve your credit score.
Apply for a secured credit card
Some credit cards are available to borrowers with bad credit scores. In particular, almost anyone can get a secured credit card.
Secured credit cards require a cash deposit when you open them, which your lender can keep if you miss your payments on the card. Because this eliminates the risk to them, secured cards usually have much laxer credit score requirements than normal cards.
You can use a secured card to build credit in the short term with the goal of trading up to an ordinary card later. We’ve listed several cards you should consider below.
Add your rent and utility payments to your credit report
Your rental and utility payments don’t normally appear on your credit report, but there are services that will let you add them manually. This will allow you to build credit by paying utilities and rent.
For instance, if you sign up for Experian Boost, you can add your regular bill payments to your Experian credit report. This will boost your credit score immediately, especially if your credit history is otherwise relatively thin.
Get a credit-builder loan
Some lenders also offer loans that are specifically designed to help people build or rebuild their credit. Credit-builder loans are low-risk and very easy to qualify for. Search for credit unions in your area—these organizations are more likely to offer this type of loan than banks.