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How Do Debit Cards Affect Your Credit?

Mike Randall 12/6/16

The use of debit cards – sometimes referred to as ATM cards – won’t impact your credit score or your credit history either positively or negatively.

That’s because the money you use or withdraw from a debit card account is your money, not money you’ve borrowed on credit.

There is one caveat:

If you have overdrawn your account using a debit card and then refuse to pay the bank for the overdrawn amount.

In this case, the matter could get sent to collections, which would certainly affect your credit in a negative way.

But since that is only indirectly related to the use of a debit card, the rule still stands.

Most people use debit cards as a convenient way to pay for things without using cash. And if you don’t have a credit card, it’s often the only way to pay if you don’t have enough cash on hand.

Of course, using a debit card requires having a bank account that you can draw the money from, so you’re really just using your own money in a different way.

“Using your card responsibly and

making payments on time is the key.”

Is there a way to do this and build a credit history?

A secured credit card is a way to use your own money for purchases, and it can also help you to build credit.

It works this way: When you apply for and get a secured credit card, the issuer requires you to deposit a certain amount into your credit card account.

They usually charge a fee for this, but the result is you have a credit card that can be used to make purchases – just like you would use your debit card.

The difference is you are using a credit card, which means you are building a history with the card issuer.

It may seem like semantics, but the card issuer will actually consider your usage history and report it to the credit bureaus.

After about six months or so, you may be able to apply for an unsecured credit card or a department store credit card. Then by making payments responsibly on those, your credit history will be established.

Whether someone chooses to use a debit card exclusively for making non-cash purchases or decides to try a secured credit card is a matter of personal choice.

If the issue at hand is a desire to build or rebuild good credit, then perhaps it’s worth consideration.

In any case, using your card responsibly and making payments on time is the key to it all. By doing so, you could find yourself on the path to a good credit score quicker than you think.

Photo source: bloomberg.com.

About Mike Randall
Mike Randall is most knowledgeable in the areas of credit scores and credit cards, having written on those topics and others for the past eight years. He graduated from California State University with a degree in English literature, and he has an extensive background in personal finance studies. When he's not keeping BadCredit.org readers informed of changes in the subprime market, Mike’s hobbies include sailing and gourmet cooking. Connect with Mike on Google+.
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