Debunking bank card myths: Is a debit card higher on your credit score historical past?

It’s no shock that journey rewards bank cards are a preferred dialogue matter right here at TPG. By strategically opening and using them, you may earn giant sign-up bonuses and additional factors in quite a lot of classes of on a regular basis spending, opening up implausible redemptions like premium-class flights and opulent resort rooms.

Nonetheless, there are a variety of misconceptions on the market in terms of bank cards, so in the present day we’re persevering with our collection that debunks these myths and permits you to start planning on your subsequent trip.

In the present day, we’re debunking a standard fable in terms of debit versus bank cards.

Fantasy: A debit card is healthier for constructing your credit score historical past than a bank card

Many learners on this planet of playing cards desire to make use of a debit card versus a bank card for almost all of their transactions.

Whereas this can be rooted in worry of the unknown, it additionally could also be easy recognition of the hazards of a bank card. If you open a brand new card and get a credit score restrict of $20,000, that’s not simply free cash. You could not belief your self with a big line of credit score and, as a substitute, desire to depend on the immediacy of a debit card. In spite of everything, there’s no “purchase now, pay later” side of a debit card. That cash comes out of your checking account (virtually) instantly.


Sadly, there’s an vital false impression in terms of debit playing cards: These merchandise should not have any influence in your credit score rating.

Hopefully, that is clear merely by means of semantics; why would a debit card influence your credit score rating? Nonetheless, we hear many learners asking this precise query, so it’s clearly nonetheless on folks’s minds.

Associated: Why a bank card is a better selection than a debit card

Credit score rating components

At its most elementary degree, your credit score rating is a numerical illustration of how nicely you handle strains of credit score which were prolonged to you. As we’ve coated in earlier debunking myths tales, it’s made up of 5 components:

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  • Fee historical past
  • Quantities owed
  • Size of credit score historical past
  • New credit score
  • Forms of credit score used

Keep in mind that these components are usually not equal, as some are weighted extra closely than others:

The components that make up your FICO rating. FICO

As you may see, none of those apply to a debit card. There isn’t any “cost historical past” on these accounts since each transaction comes out of your checking account individually. You’ll by no means owe any quantity on a debit card and since there isn’t any kind of credit score line prolonged to you, the final three components don’t come into play both.

Associated: How credit score scores work

Use a bank card to enhance your credit score rating

Sadly, over-relying on a debit card can come again to hang-out you whenever you’re seeking to finance a brand new automotive or purchase your first home and even apply to lease an condo (the place the owner or leasing firm runs your credit score). In case your credit score historical past is minimal and even non-existent, you might run into difficulties securing all these loans. Even in the event you do safe them, you might be charged larger rates of interest attributable to the truth that the lender isn’t positive of your creditworthiness.

All of this may be averted by opening and using a bank card. We advocate beginning with a no-annual-fee card such because the Chase Freedom Limitless or Citi® Double Money Card so that you gained’t should “make investments” something proper off the bat. These playing cards additionally provide easy rewards for each buy you make.


You’ll need to rigorously set boundaries on your spending in order to not rack up an enormous invoice. Additionally, you should definitely repay the stability in full each month. Even only a handful of transactions every assertion interval will exhibit to the credit score bureaus that you’re responsibly managing your accessible credit score, bettering your credit score rating and making you extra enticing to issuers down the highway.

Associated: Ten commandments for rewards bank cards

Backside line

Debit playing cards usually seem to be a safer cost methodology than bank cards, because you aren’t prone to overextending your self. The cash comes out of your account immediately, stopping a bigger invoice on the finish of the month that may accrue curiosity expenses at a really excessive fee.

Nonetheless, utilizing a debit card gained’t have any influence in your credit score rating, making it more difficult to acquire loans sooner or later. When you ought to all the time keep throughout the limits of what you may afford to really buy and pay for every month, a bank card ought to play no less than some function in your monetary technique.

Extra reporting by Emily Thompson and Chris Dong.

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