Can I Build Credit Using My Debit Card As Credit?

When you swipe your debit card at a store, you usually have the option to select whether you want to run it as a debit or a credit transaction. Unfortunately, using a debit card will never affect your credit report or credit score, even if you select the credit option.

Personal Identification Number or Signature

The main difference between selecting debit and credit when using a debit card is the method in which the transaction is processed. If you select debit, you enter your personal identification number, or PIN, and the transaction is processed very quickly. In addition, you can choose to get cash back from the store instead of visiting an ATM. On the other hand, if you select credit, you sign the receipt or keypad and the transaction is processed through the credit card company whose logo appears on the debit card, which takes a few extra days. Either way, the funds are deducted from your checking account and you do not receive a bill in the mail like you would with a credit card.

Costs

Some banks charge fees to debit card holders who select "debit" anywhere other than a bank-owned ATM. This is because the bank wants to earn money from the transaction. The bank charges merchants a much higher fee per transaction for signature-based credit purchases than for PIN-based debit purchases, so the bank encourages customers to opt for the credit purchase. In addition to costing you in bank fees, entering your PIN can make you more vulnerable to identity theft because someone in the store might see your number.

Credit Report Effects

Using a debit card never affects your credit score, even if you select the credit option and sign the receipt like you would with a credit card. This is because your credit score only considers accounts in which you borrow money and repay it. When you use a debit card, you are just using your own money, regardless of how the transaction is processed.

Building Credit

If you want to build credit by swiping plastic, you will need to use a credit card occasionally. You do not have to carry a balance on your credit card in able to build credit. Instead, you just need to pay your bill on time every month and keep the amount owed each month low in relationship to your credit limit. Another way to build credit is to make regular payments on an installment loan, such as a student loan, auto loan or mortgage.