If you are wanting to start building credit but you only ever use cash or debit cards for your purchases, what can you do?
Traditional debit cards don’t build credit history or affect your credit score.
But there are specially designed debit cards that can help you achieve a good credit score. These card issuers link their debit card to your already existing bank account and run your purchases as credit while pulling cash from your checking account to pay off those purchases.
This allows you to continue managing your finances using only the cash in your bank account while also building credit.
Debit Cards That Build Credit:
Comparison of Debit Cards That Build Credit History
|Card||Fees||Earn Rewards||Credit Bureaus||Features|
|Extra||$8-12/month||Optional||Equifax & Experian||Link directly to your bank account|
|Sequin||A deposit required||Limited to certain categories||Experian, Equifax, & TransUnion||Designed with women in mind|
|Grain||15.99% APR||No||Experian, Equifax, & TransUnion||Use your existing debit card|
|Zoro||$3/month||No||Unsure||Brand new company|
Extra was the first debit card on the market designed to help its customers with building credit.
Established in 2020, Extra began issuing Mastercard debit cards that tie directly to your checking account and process purchases via credit.
To begin, you need to fill out a quick application and link your checking account to Extra’s system. Extra currently supports linking up to checking accounts at over 10,000 different banks.
Extra will then take a look at your spending habits and the overall cash flow in your account to set a spending limit. They do not perform a credit check to do this, so there is no risk to your credit in applying and you’ll qualify even with bad credit.
Once your card has been issued, you can use it just like you would a credit card; everywhere that Mastercard is accepted.
After making a purchase, Extra will deduct the purchase price from your bank account the next business day. This way, you are making purchases on credit and automatically paying it back. So no need to worry about interest or potential late fees.
Extra charges $7/month for their basic account, though they have a premium account that costs $12/month and earns 1% rewards on all purchases. So, if you spend $1000, you’ll earn $10 in rewards.
You can redeem these rewards directly from Extra’s store for various items or gift cards.
How Extra Builds Credit History
At the end of every month, Extra totals up all of your purchases and reports the total as payment history on your account.
Currently, Extra reports this payment information only to Experian and Equifax.
Your Extra debit card will appear on your credit history like a line of credit.
This line of credit will have an opening date and payment history. This means that no matter how much you spend through your Extra debit card each month, it will not affect the credit utilization part of your credit score.
By reporting in this way, the Extra card can be a good credit account for those who have a high amount of monthly spending.
Review of Benefits:
|Rewards earning potential||High monthly fee|
|Use the card within 24 hrs of applying||Only reports to 2 credit bureaus|
|Links to over 10,000 banks|
|Won’t affect credit utilization|
The Sequin card was designed with the idea to help women build credit.
The founder, Vrinda Gupta, worked for Visa and helped develop new credit card products. Upon the launch of one of these cards, she applied for it herself and was rejected.
Frustrated with the world of credit, she left and launched Sequin. Her mission is aimed at helping women better understand and build credit.
When you sign up for the Sequin card, you’ll need to link the card to your checking account. You’ll then need to transfer over a refundable cash security deposit. Like the deposit on a secured credit card, this sets your spending limit.
As you make purchases, they are paid for using the Sequin Visa. Sequin then reimburses itself from your linked checking account. You’ll also have the ability to earn rewards on female-centric products like hair care, feminine hygiene, etc.
There are no fees, interest charges, or credit checks involved in opening a Sequin card. And if you ever wish to close your account, your security deposit will be returned to you.
It is important to note that even though this card is geared towards women, anyone can apply. This card had a limited release, so it is not currently accepting new customer. But you can sign up to join the waitlist.
How Sequin Builds Credit History
At the end of each month, Sequin totals up all of the monthly purchases and sends this to all three credit bureaus as payment history.
Similar to the way Extra works, Sequin does not report to the credit bureaus as a credit card, instead they report as an open-ended loan. This means that there is no credit utilization rate to ding your credit score.
In addition to reporting your activity to all three credit bureaus, Sequin offers a wealth of online resources including articles, quizzes, and calculators to help increase their customers’ knowledge of credit and personal finance.
Sequin’s goal is not to keep you as a customer for life, instead, they want to help women build credit and achieve credit scores high enough to qualify for other credit products like unsecured credit cards.
Review of Benefits:
|No monthly fee||Charges a refundable deposit|
|Does not impact credit utilization||Set spending limit|
|Tools & resources to better understand credit|
|Reports to all 3 credit bureaus|
|Links to your existing checking account|
The Zoro card is a brand new company offering a debit card designed to help with building credit. This company is so new that their Visa-backed card is still in an early-release phase, and you’ll need to join the waiting list if you want the card.
Once you are approved for the Zoro Visa card, you will then need to link your account to your checking account. Zoro will evaluate your purchases and cash transactions to set up a custom spending limit.
You can now get started immediately, no waiting around for the physical card to reach you.
You can use your Zoro card account to pay bills, make online purchases, and swipe the Visa card in-store. These purchases are initially paid by Zoro and then reimbursed from your linked checking account. You can even link more than one checking account to your Zoro card.
The Zoro card charges a small monthly fee of $3 and sets a spending limit based on the cash flow in your linked checking account(s).
How Zoro Builds Credit History
Each month you use the Zoro card, they will total up all of your purchases and report this as payment history to all three credit bureaus.
Much like the other debit cards on this list, Zoro reports as a loan instead of a credit card. This way, there is no credit limit to negatively impact your credit score.
Zoro will not perform a credit check either, so applying for the card will not damage your credit score and you can qualify even if you have bad credit.
In addition to reporting to all three credit bureaus, Zoro offers their customers several tools to help them better manage their finances.
Zoro lists out all of the monthly bills you pay, their totals, and their due dates. They will even send you notifications as those due dates approach.
When viewing your account, they clearly display your set spending limit, how much you have used, and how much you have left. And for your linked bank account(s), Zoro will even display your current savings account balance.
Review of Benefits:
|Low monthly fee||New company|
|Use the card within 24 hours of applying||Set spending limit|
|Tools to better track your finances|
|Reports to all 3 credit bureaus|
|Links to your existing checking account(s)|
|Does not affect credit utilization|
Grain works a little differently.
Instead of issuing you a physical card that is linked to your checking account, Grain allows you to use your existing debit card to make purchases.
When you apply for Grain, you’ll need to link your account to your checking account. Grain currently supports over 10,000 banks nationwide.
Grain will then look at your income and spending habits and issue you a credit line. This credit line will then be advanced to you in the form of cash transferred to your checking account.
From here you can use your debit card as you normally would while paying Grain back the advance that they issued you.
While Grain does not charge any kind of monthly fee, they do charge interest on the cash advance issued, but you can save money by utilizing their auto-payments feature. Their current interest rate starts at 15%.
If you have bad credit and don’t qualify for Grain’s unsecured credit line, they also offer a secured credit line that requires a cash security deposit.
How Grain Builds Credit History
Since Grain offers a true credit line, it reports more like a traditional credit card would.
In addition to reporting your payment history, they will report your current balance, credit line, and account status (opened or closed).
The good news is, just like a credit card, Grain can extend you a credit line increase once you have had your account open for 6+ months. And Grain reports your activity to all three credit bureaus.
Some potential downsides to your credit when it comes to using a Grain account include the risk of a high utilization rate (the max starting line offered is $1000) and the potential for credit damage if you make a late payment.
Review of Benefits:
|Reports like a credit card||Will impact credit utilization|
|Let’s you use your existing debit card||15%+ interest rate|
|Reports to all 3 credit bureaus||Fee for advancing funds|
|Offers credit line increases||Potential late fee|
|Offers secured credit lines||Security deposit required for secured credit lines|
Is it Bad to Run a Debit Card as Credit?
Running a purchase as credit instead of debit on a debit card will have zero impact on your credit history or credit score.
A debit card, even if it can process purchases as credit, is still just a debit card. Only credit lines can appear on your credit report or affect your credit score.
When you run a purchase as a credit on a debit card, all this does is change how the vendor processes the purchase.
While running the purchase through credit will not impact your credit score, it will be an inconvenience for the vendor who will need to pay the necessary processing fee. This is why some vendors offer discounts for customers using debit cards.
A purchase on a true credit card will impact your credit score, although this could be positive or negative depending on your individual credit history.
Does Using a Debit Card as Credit Build Credit?
No. Using a traditional debit card, even when processing a purchase as credit, will not actually help you with building credit.
A debit card is not a credit line, even though many of them can be run like a Visa or Mastercard credit card.
When you choose to run your debit card as credit, the only effect this has is on how the vendor processes the payment and what fee they are charged.
Since the debit card is not a credit product, it is not reported to the major credit bureaus, and using the debit card for your purchases will have zero effect on your credit.
Why Can’t You Build Credit with a Traditional Debit Card?
Traditional debit cards do not have credit lines, payment histories, or any of the other factors required for reporting to the credit bureaus.
Since the card issuer doesn’t meet the reporting requirements, your debit card can’t appear on your credit report or affect your credit in any way.
The special debit card alternatives we discuss in this article are different.
While they work in a similar fashion to your debit card in that purchases are paid for out of your checking account, they have been specially designed to report to the credit bureaus to build credit.
By qualifying your account as a loan (or credit line in the case of Grain), the card issuer can use your regular debit card purchases to help you build a payment history on your credit profile.
Without this added layer of credit reporting, debit cards simply aren’t able to report your activity to the credit bureaus, let alone impact your credit score.
Amanda Garland is a personal finance blogger living in Dallas, TX. 10 years ago she was living paycheck to paycheck and knew nothing about how credit works. She learned some hard lessons in her fight for financial stability. Now she has a friendly competition going with her husband to see who can reach a credit score of 850 first. She is also a poet, having obtained a Bachelor of Fine Arts degree in Creative Writing.