Can You Build Credit With a Debit Card?

If you use a debit card to cover your expenses, you may be wondering how it affects your credit. Contrary to popular belief, a debit card won’t help you build your credit, but the good news is there are other ways to establish credit and set yourself up for better financing opportunities and lower interest rates in the future. Below, we’ll dive deeper into how a debit card could impact your credit, and the steps you can take to help improve your credit over time.

In most cases, using a debit card won’t help you build credit. This is because, with a debit card, you’re simply using your own funds rather than borrowing money and repaying it as you would with a credit card. Most debit card transactions aren’t reported to the major credit bureaus, including Experian^®, Equifax^®, and TransUnion^®.¹

One exception to this is if you go into overdraft with your checking account. As long as you repay the money you’ve borrowed, you should be fine. However, if you don’t repay and your debts get sent to collections, then that could go on your credit report and may have a negative impact on your score.²

While a debit card won’t help you build your credit score, don’t worry! There are a number of ways that you can build credit over time.

• Become an Authorized User
  If you become an authorized user on a trusted friend or family’s credit card account, you can improve your credit, assuming they already have a strong credit profile and the account remains in good standing. While you won’t have to make repayments as the primary account holder will be responsible for them, the account will be added to your credit history if the card issuer reports authorized-user accounts to the credit bureaus.³
  
  
• Consider Opening Up a Secured Credit Card
  Although it can be a challenge to get approved for a traditional credit card with no credit or poor credit, a secured credit card may be an option. With a secured card, you pay a deposit that’s usually equal to your credit limit. Then, you use the card to make payments and cover transactions. If the credit card company reports your payment history to the credit bureaus, this could give you a chance to build your credit.⁴

• Explore a Credit-Builder Loan
  A credit-builder works in the opposite way of a traditional loan. First, you make fixed monthly payments so that your credit card issuer can report them to the credit bureaus. After your loan term comes to an end, you’ll typically receive your money back and may get some interest back as well. Most credit-builder loans range from $300 and $1,000.⁵

It’s important to keep a close eye on your credit report and score. This way you’ll always know where you stand and whether you need to improve your credit. With American Express^® MyCredit Guide, you can get your credit score and report for free. Monitoring your credit can also help you to spot any potential errors on your report, which may be impacting your credit. If you do notice any mistakes, you can contact the relevant credit bureau to get them resolved.