6 Best Debit Cards That Build Credit: Do They Actually Work?

The New York Federal Reserve reported that in the final quarter of 2023, American credit card balances surged by $50 billion (a 4.6% increase). With high interest rates extending into 2024 and the conclusion of many student loan forgiveness programs, you may be one of many Americans feeling the pressure from larger interest payments. In this financial climate, credit builder cards are gaining traction. They help to improve credit scores without the added risk of accruing more debt.

We've put together a list of the 6 top debit cards that can help you build credit. These cards don't check your credit score when you sign up, they don't charge you interest, and many are cheap or even free to use. Plus, some even have reward programs.

Each card has a unique set of features, but they all aim to help you get your credit score up without the usual risks that come with credit cards. We detail each company's services, potential card fees, and the general mechanics of how debit cards that build credit work.

1 — Current Visa® Build Card

The Current Visa® Build Card is a secure credit card that even comes with a points program at eligible merchants, redeemable for cash at $1.00 per 100 points.

When you set aside reserve funds in a special account, Current uses this as your spending limit for your Build Card. With the AutoPay feature, your balance will be paid off automatically from these reserved funds twice a month, ensuring your payments are on time. If you prefer manual payments, just remember to pay on time. Current reports your timely payments to TransUnion, aiding in building a positive credit history.

• Subscription fee: $0.00
• Opening deposit: $0.00
• APR: 0%
• ATM fee: $2.50, or $0.00 at All-Point®
• Overdraft fee: $0.00
• Foreign transaction fee: 3%
• Issued by: Cross River Bank, Member FDIC

2 — Extra Debit Card®

The Extra Debit Card® offers a unique twist on credit building without being a credit card. Extra does not offer a checking account of its own to link to the card. Instead, you link your bank account via Plaid to the app. Then, Extra assigns you a 'Spend Power' based on your balance and other factors. When you use the Extra Debit Card, they cover the purchase and automatically repay themselves the next business day. At month's end, they report your transactions to Experian and Equifax (but not TransUnion).

Extra offers two membership plans. The cheaper option at $20 per month comes with the debit card, spend power line of credit, and access to the spend tracking app. The $25 per month option lets you earn reward points at 1%, redeemable in their rewards store.

• Subscription fee: $20 or $25 per month OR $149 or $199 per year
• Opening deposit: N/A
• APR: N/A
• ATM fee: Varies by your linked bank
• Overdraft fee: N/A
• Foreign transaction fee: N/A
• Issued by: Evolve Bank & Trust or Patriot Bank N.A., Members FDIC

3 — Varo Believe Secured Credit Card

The Varo Believe Secured Credit Card is directly tied to a Varo Believe Secured Account. Your balances in the account act as collateral for your card payments. In other words, each purchase or ATM withdrawal that you make will use an equivalent amount from your account to ensure you can cover your monthly statement. Varo then reports your payment activity to all three credit bureaus.

To qualify, you'll need $200 or more in incoming deposits (in the past 31 days) to your Varo account.

• Subscription fee: $0.00
• Opening deposit: $0.00
• APR: 0%
• ATM fee: $3.50, or $0.00 at All-Point®
• Overdraft fee: $0.00
• Foreign transaction fee: 0%
• Issued by: Varo Bank, N.A., Member FDIC

4 — Cleo Credit Builder Card

The Cleo Credit Builder Card operates on a deposit-based system, where the security deposit that you put down (at the amount of your choice) determines your spending limit. At the end of the month, you have the option to pay off the balance or use your deposit to cover it. Like other credit builder cards, it reports to all three credit bureaus.

Cleo does not charge a fee to sign up and download their app. However, you will need to pay $5.99 per month for a Cleo Plus subscription to get their cash advance services. Cleo Builder, which gives access to the Cleo Credit Builder Card, will cost you a $14.99 per month subscription.

• Subscription fee: $14.99 per month
• Opening deposit: $1.00
• APR: 0%
• ATM fee: $2.50
• Overdraft fee: $0.00, subject to eligibility and $5.99 per month subscription
• Foreign transaction fee: 0%
• Issued by: WebBank, Member FDIC

5 — Experian Smart Money™ Debit Card

The Experian Smart Money™ Debit Card is not a secured credit card like the others on this list. It is a debit card connected Experian's mobile app, which identifies bill payments that could positively affect your credit scores, such as eligible payments for rent, streaming services, insurance payments, and utilities.

Paired with Experian membership benefits like access to your credit report, FICO® Score, and credit monitoring, it's a holistic tool for managing and improving your financial health — but does not set aside a secured balance for you to spend.

• Subscription fee: $0.00
• Opening deposit: $0.00
• APR: N/A
• ATM fee: $3.00, or $0.00 at All-Point®
• Overdraft fee: N/A
• Foreign transaction fee: 3% or $3.25, whichever is higher
• Issued by: Community Federal Savings Bank, Member FDIC

6 — Sesame Cash Mastercard® Prepaid Debit Card

Sesame Cash is a prepaid debit card that works alongside a secured line of credit to help build your credit. By transferring money from your Sesame Cash account into a secured credit line, you ensure that an amount equal to your credit balance is set aside for monthly payments. The app also updates your credit score daily, sends credit monitoring alerts, and generates credit report summaries.

Sesame Cash charges a $9.99 monthly fee and a $3.00 monthly inactivity fee. You can avoid the monthly fee if you deposit $500 via direct deposit or spend $1,000 monthly with your Sesame Cash account. Avoid the inactivity fee by making a transaction or purchase once every 30 days. (The first 30 days after account opening, both fees are waived as a courtesy.)

• Subscription fee: $9.99 per month
• Opening deposit: $0.00
• APR: N/A
• ATM fee: $2.50, or $0.00 at All-Point®
• Overdraft fee: N/A
• Foreign transaction fee: 0%
• Issued by: Community Federal Savings Bank, Member FDIC

Do Credit Building Debit Cards Work?

Yes, credit building debit cards really can be effective tools for improving your credit score. Here's how they work:

When you use a credit building card, you're essentially using your own money. The spending limit is determined by the amount you put into a security deposit or reserve account. At the end of each month, you have the option to either pay off your balance or let your security deposit cover it. This setup makes it nearly impossible to rack up debt (that means you won't be subject to interest charges on unpaid debts either).

What Gets Reported to the Credit Bureaus

The companies behind these cards are responsible for reporting your credit activity. This may include:

• Basic account details;
• Account status (in good standing, delinquent, etc);
• Current balance;
• Payment history;
• Outstanding balances;
• The highest amount of credit you've used.

Credit building cards also track your regular monthly and recurring bills, such as utilities, phone bills, and rent, which demonstrate your ability to pay bills consistently. These payments are not reported by standard debit cards, but thanks to credit building apps, your positive payment history can be reported to credit bureaus, potentially boosting your credit score.

Are Credit-Building Debit Cards Worth It?

Whether credit-building debit cards are worth it really comes down to your future financial plans. If you're thinking about taking out a loan soon for something big, like a car, college tuition, or a house, then yes, they could be very worthwhile. Here's why: the better your credit score, the lower the interest rate (APR) you'll get on that loan.

FICO Score 8 is the most commonly used credit score model, ranging between 300 and 850. A score of 700 is generally seen as good. So, if you're looking to boost your score into the 700 range, a credit-building debit card might just be the tool you need. Many of these cards come with apps that let you track your credit score progress without the fear of hard credit checks that can ding your score.

Current is a solid option to consider because it's free. Starting to report your responsible payment history with a tool like this means you've got nothing to lose.

Exceptional vs Good vs Fair vs Poor Credit Scores

Here's how the numbers might play out with a new car loan, as an example:

If your credit score is exceptional (750 or more), you could land an APR of under 4%. A good score (above 700) might get you under 6%, while a fair score (above 650) could get you under 8% and a poor score (649 or less) could see you facing an APR of 13% or higher. These are just very rough estimates. Plus, given today's high interest rates, expect to tack on an extra 1-3% to these figures.

The difference between a 6% APR and a 13% APR on a $50,000 car loan can easily mean over $100 more each month in payments. So, if you're planning on borrowing soon, using a debit card that builds credit could definitely be worth it to improve your credit history before you speak with your lender.

Recap: The 6 Best Debit Cards That Build Credit

Our guide lists 6 debit cards specifically designed to build credit. Each card offers unique benefits, catering to different needs. Let's recap which one aligns well with your financial goals:

1. Current Build: No monthly fee card with a rewards program.
2. Extra Debit: Pricey membership that links to your bank via Plaid.
3. Varo Believe: No monthly fee, but qualify for credit builder.
4. Cleo Credit Builder: Expensive card with similar services to others.
5. Experian Smart Money™: App that reports your bill payments.
6. Sesame Cash: Prepaid card that generates credit reports.