Do you think debit cards should affect your credit score?
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JLeslie (
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February 12th, 2012
I saw Suze Orman a few weeks ago on TV talking about the new debit card she is offering. During the interview she said one of her goals is to have debit cards influence credit scores. I see the quandary that those trying to do the right thing financially, possibly including cancelling their credit cards, or young people who do not have credit cards, have some trouble building credit, but I don’t see how a debit card proves someone is responsible with money or credit.
What do you think?
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12 Answers
No. A debit card doesn’t prove that you can borrow from and pay back a creditor responsibly, since you’re not borrowing anything.
A debit card history will show whether you can handle money sensibly. Those who avoid debt in the first place are more likely to be responsible with money than those who go into debt.
There are better options for those who don’t have credit cards. This article says that although Suze wants to offer a prepaid card for those who want to establish a credit history without getting a credit card it will not work. Why? Because FICA is not onboard and FICA is the one controlling credit scores.Read the entire article here. It does offer some alternative suggestions.
http://money.msn.com/credit-rating/why-suzes-card-will-not-help-you-weston.aspx
@flutherother Yes, but then companies would be monitoring transactions and judging/scoring how people spend their own money. How does one define “sensible”? Knowing how to budget is not a surefire indicator of how a person will behave when given access to a large line of credit. There’s no risk involved.
If someone is trying to completely avoid debt, then their credit score shouldn’t matter.
It is ironic that those who are most careful with money can’t get a loan because they have no credit history. People are lured into debt so loan companies can make money from them. Sensible used to mean staying within your budget. I don’t know what it means nowadays.
Correction: I meant FICO not FICA
To answer the question, no I don’t think so, because debit is not credit.
However, those who extend credit mostly want to know that they’ll see their money paid back on time. “Sensible” in this case means using credit, and paying it back on time so that there’s documentation that creditors can look up, showing you know how to properly use credit. This makes sense if you realize that the point of lending credit is to profit from the payback. Having no credit record (because you don’t borrow) is a sign that you don’t know how to use credit, in the same way that not driving a car is a sign that you might not know how to drive (and not a sign that you’re a good driver).
@flutherother How does a debit card show you can handle money? The thing about credit cards is it shows you will pay for something once you already have the goody you purchased in your position and still owe the money. That you can budget funds to pay bills are coming in. Debit just shows you only spend what you have at the moment, just like cash. I understand there are probably a lot of debit card users who only use debit, because they feel it makes them responsible for their money, not to overspend, but if I were the lender, I don’t know if a debit card holder is one of those people, or the type of person who cannot control their spending.
I wouldn’t think it would, any more than a checking account.
@bkcunningham I tend to agree. But, supposedly her card is more transparent about fees, and there are fees, and gives the user more up to date information via texts.
That is a good benefit for her card then, @JLeslie. I’m probably a little biased toward Suzy. I followed her before Oprah helped to skyrocket her career. For some reason, I don’t like her anymore. I think the fame went to her head.
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