Debit Cards and Your Credit Score

The world of credit scores and credit history can be confusing. A common question from members of one of Dallas’ best credit unions, GO Federal Credit Union, is what effect, if any, debit cards have on your credit.

The answer is: they don’t have any impact on your credit for the most part. Standard debit cards do not affect your credit score or show up in your credit history because debit cards aren’t extending a line of credit. When you use your debit card, money is immediately withdrawn from your bank account. When you use a credit card, charges are applied to an account, and you received a bill at the end of the month to make payments on those charges.

Exclusively using debit cards means that you will not go into debt. However, the downside is that you aren’t building up any credit history. This may negatively impact your credit score.

Prepaid debit cards work similarly to regular debit cards. They store money on an account, but you aren’t borrowing money from anyone to use them. This makes credit bureaus uninterested in the use of prepaid debit cards.

Yes, some prepaid debit card companies do report your history to the credit bureaus. It is important to understand that this doesn’t affect your credit score the same way credit cards do.  If they report your use to the credit bureaus, all it shows is a history of your payments. This report does not actually impact or help your credit score.

GO Federal Credit Union offers the GOFCU Visa Credit Card. By getting a GOFCU Visa Credit Card, members receive lower interest rates and no annual fee, no cash advance fee, and no balance transfer fee. And to assist with the transition from a debit card to a credit card to help increase your credit score, GOFCU allows members to set-up automatic payments from their GOFCU account, make payments using GOFCU online banking, or stop by their nearest GOFCU branch.

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