Does Closing a Debit Card Affect Your Credit Score?
Does closing a debit card impact your credit? Understand why these financial tools operate differently and their distinct relationship with your score.
Closing a debit card does not directly affect your credit score. This is because debit cards are not credit products; they do not involve borrowing money, and their activity is not reported to credit bureaus. The funds used with a debit card come directly from your own bank account, establishing no debt or repayment history for credit scoring models to evaluate.
Understanding Debit Cards
A debit card provides a direct link to the funds held in your checking or savings account. When you use a debit card for a purchase, the money is immediately deducted from your available balance. This means you are spending your own deposited money rather than borrowing funds from a financial institution. Since debit card transactions draw directly from your existing funds, there is no associated debt or credit line, and banks do not report this activity to consumer credit bureaus.
How Credit Scores Work
A credit score is a numerical representation that helps lenders assess your creditworthiness, indicating how reliably you manage financial obligations. These scores are calculated based on the information contained in your credit reports. Lenders use this score, among other factors, to determine eligibility for loans, interest rates, and other credit terms.
Several factors contribute to the calculation of a credit score. Payment history, which reflects whether you pay bills on time, is often the most significant component. Other factors include the amounts owed, the length of your credit history, the types of credit accounts you have (such as credit cards and various loans), and any new credit inquiries. Credit scores are fundamentally built upon your history of borrowing money and your ability to repay it responsibly.
Why Debit Cards Don’t Affect Credit Scores
Debit cards do not influence your credit score because they operate differently from credit products, allowing you to access your own money, not borrowed funds. This means no debt is created, no repayment schedule exists, and no interest charges are incurred. Credit bureaus primarily track borrowing and repayment behavior. Since debit card transactions do not involve credit, banks do not report this activity. Therefore, closing or using a debit card account has no bearing on your credit report or score.
Debit Cards and Credit Cards Compared
Debit cards and credit cards, while similar in appearance and use, function on fundamentally different principles. A debit card allows you to spend money already in your bank account, acting as a direct conduit to your deposited funds. In contrast, a credit card provides access to a line of credit, meaning you borrow money from the card issuer for purchases. This borrowed money must be repaid, often with interest, and your repayment behavior is reported to credit bureaus. Credit cards can help build a credit history, while debit cards do not.