Using a debit card, rather than a credit card, to pay for items typically won't impact your credit history or credit scores. When you pay with a credit card, you're essentially borrowing the funds to pay back later.
When you run your transaction as credit with your debit card, you are still authorizing a debit from your checking account. You'll never be charged interest or receive a bill for doing this. Of course, choosing credit at the point-of-sale will not help you build your credit.
Debit cards come with both benefits and drawbacks. Debit card advantages include flexibility, security, and the ability to use them almost anywhere. Debit cards can help some consumers manage money. Debit card cons include a lack of features, such as cashback rewards and additional protections.
Account activity is reported to the credit bureaus to help you build credit. Current will initially report to TransUnion when the card is released. However, it will eventually transition to three-bureau reporting with the other major credit bureaus – Experian, TransUnion and Equifax – in the near future.
While a debit card typically will not help you improve your credit, it can still be part of building good financial habits. Because they use money in your bank account, debit cards may be a good option to help prevent debt, avoid interest charges or avoid overspending.
Yes, Current is a legitimate fintech with banking services. Your money is insured for up to $250,000 through Current's issuing bank, Choice Financial Group and Cross River Bank. Current also uses several security protections to keep your information safe.
If you overspend, you could get hit with costly overdraft fees: If charges to your debit card cause your checking account balance to go negative, you could suffer overdraft fees and other steep charges that far exceed the potential costs of using a credit card.
However, when used responsibly, a credit card can be a more effective means of paying than a debit card or cash. Credit cards typically offer all kinds of perks and benefits, including a one-time signing bonus for a new cardholder, cash back for purchases, rewards points, and frequent-flyer miles.
What most people don't realize, however, is that you can choose to use your debit card as "credit" at checkout. That doesn't mean you borrow money to make the purchase, but it does change some aspects of the transaction.
Can you have a credit score without having a credit card? Yes, you can establish credit and have a credit score without a credit card. Credit card companies are not the only ones that report your payment and usage history to the three credit bureaus that report on your credit score, Experian™, TransUnion® and Equifax®.
Using debit cards
If you're spending your own money with a debit card, that won't affect your credit score in any way. Just bear in mind, if you dip into an overdraft by using your debit card, it could affect your credit score – there's more detail earlier in this page.
If you run your debit card as 'credit' you can minimize your liability and recover your money quicker in some cases of unauthorized transactions and disputes. Reminder: Remember, running your debit card as 'credit' does not provide credit to cover the purchase.
Yes, banks have debit card limits for how much you can spend or how much money you can withdraw at an ATM. Daily purchase limits can range from $300 to $10,000. Daily withdrawal limits for debit cards can vary from $200 to $5,000.
You'll avoid a big bill, late payment fees and interest.
Plus, you'll do your credit score a favor by avoiding late payments and interest on credit card balances carried over from month to month. That's a big one. With a debit card like those at The Summit, you'll not pay a cent of interest.
Not paying on time
But it's best to always pay at least part of your credit card bill on time. Missing or late credit card payments can have a big impact on your credit score and fees. Credit-scoring companies like FICO® and VantageScore® weigh your payment history as an important factor in your credit score.
Some ATMs will charge withdrawal fees, and if you use more than the agreed overdraft limit then the fees tend to be much greater than those incurred by credit card usage. Another disadvantage of debit cards is the fact that they have limited funds, which can slow down business.
Can you track someone who used your debit card online? While you can't personally track someone who used your debit card online, banks have systems to trace such activities. If you report the fraud, they can investigate the source and potentially work with law enforcement to find the perpetrator.
You won't be able to buy things. Some banks and credit unions have overdraft protection. This lets you use your debit card even when there's not enough money in your account. But you might have to pay an overdraft fee and interest.
Safer Credit Building uses that money to automatically pay your monthly balance. This will help you avoid late payments and outstanding balances. If Safer Credit Building is not turned on, Manual Payments can still be made at any time by going to Settings → Safer Credit Building → Make a Payment.