Does Choosing 'Credit' on Your Debit Card Affect Your Credit Score?

by Steve Lander
Debit cards can help you track your spending but they may have a price.

Debit cards look like credit cards and can be used almost anywhere that takes credit cards, but they aren't credit cards. Your debit card has nothing to do with your credit score because it isn't credit. While it doesn't affect your score directly, choosing to use it instead of a credit card can even have an indirect negative effect on your credit score.

Credit vs. Debit

Credit has nothing to do with whether or not your card has a Visa or MasterCard logo -- those are just payment systems. When you use a credit card, the issuer gives you its money so you can buy things with the understanding that you'll repay it. When you use a debit card, on the other hand, no one credits you with anything. You take out money from your own account to pay the merchant.

Credit Report

Your credit report generally contains information about how you use borrowed money. It will include information on mortgages, student loans and car loans. It also has records on your credit cards, such as how long you've had them, your credit limit and your payment history. However, credit reports don't have information on your regular bank accounts. Since your debit card is tied to your bank account rather than a credit account, it doesn't show up.

Low Activity

Using your debit card can indirectly hurt your credit score in two ways. First, if you choose to have a debit card and not carry a credit card, you're missing out on the opportunity to create a history of credit card use. You could even end up being unable to get a score if you don't have any credit history. Second, if you have credit cards and don't use them they could get cancelled because of inactivity, Since your score is based on how reliably you use credit, showing 0 percent use of your cards could drop your score. Using just a little of your credit limit -- like charging a $25 T-shirt on a card with a $500 limit and paying it off right away -- can help keep that from happening.

Bank Reports

Your debit card use can end up on a report, but not your credit report. Banks have reporting systems like ChexSystems and Early Warning to track how customers use their accounts. If you end up with a black mark on those reports you could find it difficult to get a debit card or checking account. A negative report usually comes from something like bouncing a check or overdrawing your account, so just using your debit card shouldn't hurt you.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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