What Is a Debit-Style Credit Card?

Photo: Zero

Ever wish there was a way to build credit without the ever-present temptation to spend beyond your means? Maybe you seek the safety of making purchases with credit, but like being able to see your actual cash balance available for purchases on your debit card.

A new type of card, called a debit-style credit card, could offer the best of both worlds.

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A debit-style credit card requires the use of an accompanying checking account. The credit limit of the card will reflect the amount you have in that checking account, preventing you from spending more than you could immediately pay back. Meanwhile, the card offers perks like building your credit history and allowing you to earn rewards.

Think of it as an update to a few traditional methods of managing your spending.

  • Secured credit cards: Require a deposit to set your credit limit to that amount.
  • Charge cards: Require you to pay your entire balance each month. Some American Express cards still work this way.
  • Optimizing credit card payments: Some people make one payment per billing cycle, others choose to make a credit card payment each time they make a purchase. A few startups sought to automate high-frequency payments, but don’t exist now—Debx was acquired by competitor Debitize in 2018, then Debitize was acquired by Trim in 2019.
  • Prepaid debit cards: You decide how much cash to put on a debit card, then reload it as necessary.

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Debit-style credit cards aren’t widespread quite yet. Online banking app Zero recently launched the Zerocard that allows you to toggle the debit feature on or off. When it’s on, your balance is automatically paid from your checking account each month. When it’s off, you can choose to spend more than what’s in your checking account, with your Zero card acting like a typical credit card.

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One big downside of this particular service: to get a Zero card, you need to download the Zero app, which is only available on iOS. And if you don’t pay your entire balance, you’ll face a steep 24.99% variable interest rate.

If you already feel confident about your credit use, a debit-style credit card may not seem attractive to you. But if you’re just getting started building and using credit, a credit card that’s tied to your checking account could be valuable. While cards that work this way aren’t common yet, you can be sure that banking disrupters will be jumping on the hybrid bandwagon any minute now.

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