Credit 101: Debit Cards Don’t Build Your Credit Score
Posted by Richard on September 8, 2022
You use debit cards and credit cards in the same way: A swipe or wave in a card reader or type in your number online. But the two are very different, and only credit cards help build your credit score and are listed on your credit report.
Activity on a debit card isn’t reported to the three credit bureaus (Experian, Equifax and TransUnion). The credit bureaus monitor how people use credit. But they don’t monitor debit cards, which are used like cash. As soon as the purchase is made, the full amount is deducted from your checking account. With credit cards, the full amount is loaned to you on a credit line. With debit cards, you avoid interest charges and you don’t go into debt because if you don’t have the money in the bank, the debit card will be declined.
Credit cards, on the other hand, can build credit — or trash your credit if you don’t make the payments on time. If you use a credit card on purchases you can pay off quickly, especially in the same month, your credit score may increase.
If you have bad credit or no credit history, you can’t get a conventional credit card. Enter the secured credit card. With a secured card, you make a deposit to the credit card company and that deposit becomes your credit line. Then, you can use the card to buy an item every month and then pay off the item each month. This way, you build a history of paying for what you buy. That’s good credit. In some cases, credit card companies will eventually upgrade a secured card to an unsecured card.