What Is a Debit Credit Card?
Have you ever dreamed of a way to increase your credit without the ubiquitous temptation to spend your money beyond your means? You may be looking for security when shopping on credit, but you like being able to see your actual shopping cash balance on your debit card.
A new type of card called a debit credit card can offer the best of both worlds.
The debit type credit card requires the use of an accompanying checking account. The credit limit of the card will reflect the amount you have in your checking account, preventing you from spending more than you could immediately pay off. Meanwhile, the card offers benefits such as building your credit history and the ability to earn rewards.
Think of it as an update to several traditional methods of managing your expenses.
- Secured Credit Cards : A deposit is required to set a credit limit for this amount.
- Payment Cards: Requires you to pay out your entire balance every month. Some American Express cards still work the same way.
- Optimize credit card payments: Some people make one payment per billing cycle, others prefer to make a credit card payment every time they make a purchase. Several startups have sought to automate high-frequency payments, but there are none now: Debx was acquired by rival Debitize in 2018, then Debitize was acquired by Trim in 2019.
- Prepaid Debit Cards : You decide how much money to put on your debit card and then top up if needed.
Debit credit cards are not yet widespread. Online banking app Zero recently launched Zerocard, which allows you to enable or disable the debit feature. When enabled, your balance is automatically paid from your checking account every month. When turned off, you can spend more than you have in your checking account, and your Zero card acts like a regular credit card.
One big drawback of this particular service: in order to get a Zero card, you need to download the Zero app, which is only available on iOS. And if you don’t pay off your entire balance, you face a high variable interest rate of 24.99%.
If you are already confident in using credit, a debit credit card may not seem attractive to you. But if you’re just getting started with creating and using credit, a credit card linked to your checking account can be helpful. While cards that work this way are not yet common, you can rest assured that the disruptors of banking will jump on the hybrid bandwagon any minute.