Can I build credit using a Visa debit card? What about a MasterCard my parents pay, does that help my credit?
A Visa Debit card is a type of prepaid card which can be used to make purchases as though it were a credit card. In other words you can give the card number to a merchant and they can accept payments through the card as though it were a Visa credit card.
As with other types of debit cards and prepaid cards, Visa Debit only works once you have transferred money to the card. This is sometimes called “loading up” the card. Once you have put money on the Visa Debit card you can spend it.
While the Visa Debit card looks like a normal Visa card to most merchants, it works differently. With a credit card you make a purchase first and then pay the money back to the credit card provider later. You’re borrowing the money from the credit card company to make a purchase, then paying it back down the road.
With a Visa Debit (or other prepaid card) you are supplying the money up front, loading it onto the card, and then using that money to make a purchase.
Because you’re providing the money up front with a prepaid card, you’re not borrowing any money and therefore not building any credit. A credit score is earned by successfully borrowing and paying back loans and, with prepaid cards, you’re never borrowing any money.
As to the second part of the question: will having a MasterCard that your parents pay help your credit? This will depend on whose name is on the MasterCard account.
If you took out a MasterCard in your name and you are the sole person responsible for the debt on it, then your credit rating will benefit when the bill is paid, regardless of who pays it. (Assuming the bill is paid on time.)
However, if the MasterCard was set up by your parents and you are an “authorized user” on the account – someone who is allowed to use the card, but not responsible for paying any debt on the account – then your credit rating won’t benefit. Your parents’ credit score will gradually benefit from paying off their card’s debt, even if you are the one in possession of the card.
Basically, if the bill is in your name your credit benefits from it being paid. If someone else has their name on the bill then they benefit when the bill is paid.
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