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Debit-credit hybrid cards are a relatively new type of account that can help you build credit with your everyday purchases and on-time payments. You can only spend what you have in a linked account, so overspending isn't a risk. Most also work like charge cards, which means no interest charges.
But like other financial products, these hybrid cards come with both benefits and drawbacks. Here's what you need to know.
Can You Build Credit With a Debit Card?
A traditional debit card typically won't help you build credit because banks don't report your checking account activity to the national credit bureaus. With no record of repayment, there's nothing for a credit scoring model to measure.
There are, of course, some exceptions, such as the Experian Smart Money™ Digital Checking Account & Debit Card. But in general, you won't be able to build credit with a debit card.
For people who want to build their credit history but don't want the threat of high-interest credit card debt, debit-credit hybrid cards provide a solution. These cards combine features of both payment methods to give you a safer way to accomplish your goal. They're generally offered by fintech companies rather than major credit card issuers.
Here are some of the most popular options:
- Chime Card
- Current Build Card
- Extra Debit Card
- Firstcard
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How Do Debit-Credit Hybrid Cards Work?
Each card works a little differently, but they all tend to share the same key features that help you improve your credit history over time with fewer risks.
Funding Source
Depending on which card you choose, you'll use one of two funding arrangements:
- You move money from a checking account into a secured account attached to the card.
- You link an outside bank account, and the issuer fronts each purchase before pulling the funds back.
Spending Limits
Because there's typically no credit check involved when you apply, your spending power is determined based on how much cash you have in your attached secured account or your linked checking account. In some cases, the card issuer may also consider other factors, such as your history with the issuer and expected upcoming deposits and withdrawals.
As a result, there's no preset spending limit like you might get with a traditional credit card. Instead, your limit may change from month to month based on how much cash you have on hand.
Credit Reporting
To help you build credit, debit-credit cards report your payments to the credit bureaus. However, not all of them report to all three. Here's a summary of what to expect from the cards listed above:
| Card | Reports to |
|---|---|
| Chime Card | Experian, TransUnion and Equifax |
| Current Build Card | Experian, TransUnion and Equifax |
| Extra Debit Card | Experian and Equifax |
| Firstcard | Experian, TransUnion and Equifax |
Because lenders may check your credit reports with any of the three credit bureaus, it's crucial to make sure a card issuer reports to all of them. If an issuer won't explicitly say they report to all three, it's safe to assume they don't.
Note: Because these hybrid cards don't have a preset spending limit, the issuers may report your balance and payment status, but there's no credit utilization ratio. In other words, using up your full spending power each month won't ding your credit.
Automatic Payoff
Paying off your balance may look different depending on which card you choose. Some card issuers allow you to make payments manually or set up automatic payments. Others will automatically pull payments from your linked account, so there's no risk of missing one.
Pros and Cons of Debit-Credit Hybrids
If you're considering a debit-credit hybrid card, it's important to understand both the benefits and drawbacks, particularly in contrast to traditional credit cards.
Pros
In addition to helping you build credit, debit-credit hybrid cards also come with the following benefits:
Pros
No credit check to qualify: These cards generally don't require a credit check when you apply, making it easier to get approved with a low credit score or no credit history. However, some may review your bank account history to determine your eligibility.
Low cost: Debit-credit hybrid cards typically don't charge interest because they require full payments every month. Some cards also don't charge an annual or monthly fee. While your spending power is tied to your linked balance, you don't have to lock up funds in a security deposit like you would with a secured credit card.
Helps avoid overspending: Because your spending power is limited to the cash you load into your account or the funds you have in a linked checking account, you won't have to worry about getting into expensive credit card debt.
May offer rewards and other benefits: As with traditional credit cards, debit-credit hybrid card features can vary. However, some cards offer rewards that can add value to your everyday spending.
Cons
Although the benefits often outweigh the drawbacks, it's still important to understand the disadvantages before you apply:
Cons
May not report to all three credit bureaus: Some card issuers may not report to all three credit bureaus, which can limit your progress. Read the fine print to make sure you get full credit for your responsible card use.
Can still run into payment issues: Not all issuers require automatic payments, and if you miss a payment for any reason, it could result in late fees and even damage to your credit score.
Some may charge extra fees: While they don't typically charge interest, some cards charge annual or monthly fees.
Rewards credit cards may offer better benefits: If you have good or excellent credit, a debit-credit hybrid card can still be a good way to avoid debt. But if you pay your bill in full every month, you may be able to get better rewards and perks with a rewards credit card.
Alternatives to Debit-Credit Hybrid Cards
A hybrid card isn't the only way to build a credit history while limiting your exposure to high-interest debt. Depending on your situation, one or more of these alternatives may be a better fit:
- Secured credit cards: Secured cards require a refundable deposit that typically sets your credit limit. They're widely available to people with limited or damaged credit, though they do charge high annual percentage rates (APR) on unpaid balances.
- Unsecured credit cards: Some unsecured cards, including store credit cards, accept applicants with thin credit files. However, you should watch for small credit limits, as well as high APRs and annual fees.
- Authorized-user status: If you have a family member with good credit, consider asking them to add you as an authorized user on their card. The entire account history shows up on your credit reports, so responsible use on their end can build your credit history.
- Credit-builder loans: With a credit-builder loan, the lender holds the loan proceeds in an account while you make payments. Those payments are reported to the credit bureaus, and you receive the funds once you complete your repayment plan.
- Bill payment reporting: Experian Boost®ø®ø adds eligible rent, utility, phone, insurance and streaming payments you're already making to your Experian credit file for free.
Monitor Your Credit Progress With Experian
Regardless of how you decide to build or rebuild your credit history, Experian's free credit monitoring service can help. With free access to your Experian credit report and FICO® Score☉ Θ, you'll be able to understand how your actions impact your credit score and track your progress. You'll also get real-time alerts when changes are made to your credit report, making it easier to address potential issues as they arise and to report identity theft before it wreaks havoc on your credit profile.
The Experian Smart Money™ Digital Checking Account & Debit Card can help you build credit without debt by linking to Experian Boost, which gives you credit for eligible bill payments after three months of payments. You'll also pay no monthly fees¶ and have access to more than 55,000 fee-free ATMs worldwide**. See terms at experian.com/legal.