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Paul Yamilkoski

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Debit Cards And Your Credit Scores

I get asked all the time about debit cards and how their use affects credit scores. Most of the time, it is someone trying to be responsible and build credit.

I’m always glad to hear the question, because it at least shows that they are thinking about what things they can do to improve their credit or protect it. So many people don’t give their credit a second thought except when they are applying for loan of some kind.

Just a quick tip, if you don’t already know roughly where your scores are and are applying for a loan, you have waited too long. I hope that your time line is not very important and you don’t need the loan very quickly, because if you get denied for credit problems there is very little that can be done in 30-60 days to change that appreciably.

Oh sure, you could pay down balances today and see the benefit in 30 days. But if you can’t do that, or that is not the problem, it will take more time and expertise.

Anyway, back to the subject of debit cards.

To make things short and simple, debit cards have no affect on your credit scores at all.

I know, I know, there is a Visa or Master card symbol on it and you commonly use them as credit instead of debit in transactions, but that only affects the way they charge you and the amounts you can spend per day or per transaction.

For example, when you go to the gas pump and use your debit card they ask you if you want to use it as a debit. If you do, they hold an additional amount from your account temporarily. This does not happen when you choose the credit option.

There are other elements to how things are paid, but the important thing to remember is that debit cards spend money out of your checking or savings account. It is your money that you already earned and received that you are spending.

With a credit card, you have actually been issued a line of credit for a determined amount of money. You are not spending any money you already have. You are spending money that a bank is providing for you to use.

Another important distinction is with those cards that look like credit cards in the Wal Mart check out isle. Those are not credit cards either. They are debit cards. You have to load those with your own money to spend. You are not issued a credit line of someone else’s money to spend.

So remember, if you had to put money on the card or the card accesses your checking or savings account, it is not a credit card and will not get reported to the credit bureaus and will not affect your credit scores.

“Well what about secured cards? Don’t I have to put money on those to be able to use them? But aren’t those supposed to help build your credit?” You might ask.

Great questions. The simple answer is that secured credit cards are credit cards. You have been extend a line of credit to use. Generally the amount is equal to a security deposit you pay the bank. The important thing to remember is that you are not spending that money. They are holding that money in an account as collateral, in case you default on paying them back for using the card. It is similar to when you buy a car. The bank holds the title to your car as collateral until the loan is paid. With secured cards, the bank holds your deposit the same way.

Which brings us back to debit cards. Debit cards do not affect your credit score at all.

I hope this has been helpful. Please share it with your contacts on social media. So many people ask about this topic, that I’m sure someone could use the info.

If you have any questions or comments, please let me know. I am always very happy to help.

If you, or someone you know, could use a little credit help and want to make a change , a reputable credit restoration company like Heartland Credit Restoration is a great place to start. You will reach your credit goals much faster and safer with the help of a professional. So if you want to accomplish qualifying for that new home within a year, then get the help.

Call me for a free consultation to see how we might be able to help. 319-533-5236.

If you are a lender or realtor that has a client you might have to turn away due to credit problems, then let me see if Heartland Credit Restoration can help change that client into a approved client. You should never have to say “NO” to a client. We can help change those into a “YES”.

Call me for a free consultation. 319-533-5236.

I’m looking forward to helping you. Don’t forget to do me a favor and share this with your contacts on social media and let me know what you think.

In the mean-time, I hope you have a wonderfully blessed day!

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