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Debit-credit hybrid cards are a new breed of plastic that can give you the best of both worlds—build credit with your everyday purchases and on-time payments without the threat of overspending or paying high interest rates.
If you're looking for an opportunity to build or rebuild your credit history, here's how these hybrid cards work and why they may be preferable to many traditional credit cards.
What Are Debit-Credit Hybrid Cards?
As their name suggests, debit-credit hybrid cards, sometimes called "crebit" cards, are a cross between a credit card and a debit card.
Like a credit card, you can make purchases and pay them off. In turn, the card's issuer will report your account activity to the credit bureaus, helping you build a positive credit history. However, these cards typically only allow you to spend up to the amount you have in a linked checking account or have loaded onto your card—similar to a traditional debit card or prepaid debit card.
They typically act as charge cards, which means you can't carry a balance from month to month. That means there are no interest charges, and in many cases, these cards also don't charge annual or monthly fees. Some may even offer rewards on your everyday purchases.
Some popular debit-credit hybrid cards include:
- SuperCash Card
- Tomo Credit Card
- Extra Card
- Zoro Card
Pros and Cons of Debit-Credit Hybrid Cards
If you're considering a debit-credit hybrid card, it's important to understand both the benefits and drawbacks, particularly in contrast to traditional credit cards.
Pros of Debit-Credit Hybrid Cards
- No credit check to qualify: Getting approved for a credit card with no credit history or a low credit score can be difficult. Fortunately, these cards generally don't require a credit check when you apply. However, some may review your bank account history to determine your eligibility.
- Low cost: Debit-credit hybrid cards typically don't charge interest because they require full payments every month—in some cases, they may even pull payment from your linked checking the day after you make a transaction. Some cards don't charge an annual or monthly fee, making them a low-cost alternative to some credit cards for bad credit.
- Helps avoid overspending: Depending on which card you choose, your spending power may be limited to the cash you load into your account or the funds you have in a linked checking account. Either way, you won't have to worry about getting into expensive credit card debt.
- Can build credit: Despite not requiring a credit check to get approved, these cards typically report your account activity to the credit reporting agencies, allowing you to build your credit history.
- Doesn't require a security deposit: While your spending power is limited to the cash you have available, you don't have to put up a security deposit to get approved.
- May offer rewards and other benefits: As with traditional credit cards, debit-credit hybrid card features can vary. However, some cards offer rewards and other benefits that can add value to your everyday spending.
Cons of Debit-Credit Hybrid Cards
- May not report to all three credit bureaus: While credit reporting can help you build credit, keep in mind that some card issuers may not report to all three credit bureaus (Experian, TransUnion and Equifax), which can limit your progress. Read the fine print to make sure you get full credit for your responsible card use.
- No wiggle room for emergencies: While it's not ideal to spend more on a credit card than you can afford to pay off, having that line of credit can help out when you're in a financial pinch. With a debit-credit hybrid card, you won't get that flexibility.
- Can still run into payment issues: If, for any reason, a payment gets rejected because you don't have enough money in your checking account, you may be subject to a returned payment fee from the card issuer and a nonsufficient funds fee from your bank. If your bank approves the payment, resulting in an overdraft, you could incur an overdraft fee. Missing a payment for 30 days or more could damage your credit.
- Some benefits may be unsustainable: If you choose a card based on its rewards or other benefits, there's no guarantee you'll get those forever. The Tomo Credit Card, for instance, offered 1% cash back on every purchase when it first launched, but it no longer offers rewards.
- Rewards credit cards may offer better benefits: If you have good or excellent credit, you may seriously consider a debit-credit hybrid card as a way to avoid debt. But if you pay your bill in full every month, you may be able to get better rewards and perks with a rewards credit card.
Alternatives to Debit-Credit Hybrid Cards
Depending on your situation and goals, here are some potential alternatives to debit-credit hybrid cards to consider.
Secured Credit Cards
Designed for people with limited, poor or even no credit history, secured credit cards function similarly to traditional unsecured credit cards, but they require an upfront security deposit to get approved.
In some cases, you may need to close the account to get your deposit back, but some card issuers may return it sooner if you use the card responsibly.
Unsecured Credit Cards
Even with limited or poor credit, you may be able to get approved for an unsecured credit card. Some of these cards don't charge annual fees, and they may even offer rewards. But watch out for high interest rates, annual fees and other limitations that could impact your financial situation.
Become an Authorized User
If you have a family member who has good credit, consider asking them to add you as an authorized user on their credit card account. Once added, the entire account history will show up on your credit reports. If they use the card responsibly, the new tradeline can help build your credit history.
However, the opposite is also true, so make sure they don't regularly run up a large balance and haven't missed any payments.
Monitor Your Credit Progress With Experian
Regardless of how you decide to build or rebuild your credit history, Experian's free credit monitoring service can help. With free access to your FICO® Score☉ and Experian credit report, you'll be able to understand how your actions impact your credit score and track your progress. You'll also get real-time alerts when changes are made to your credit report, making it easier to address potential issues as they arise and to report identity theft before it wreaks havoc on your credit profile.