Are reloadable prepaid debit cards or debit cards reported on my credit report?

I received the following question from a follower last week.  It has to do with why some of her cards are not appearing on her credit reports. Read on…“John, I have three credit cards and only one of them is appearing on my credit reports. Is there a way to get them on my credit reports? One of them has a credit limit of $850.  The other one is a debit card and the third is a prepaid card that I purchased from a local drug store.”

To answer this question is prepaid cards and debit cards aren’t extensions of credit so they won’t be reported to the bureaus.

It might be helpful to understand the difference between a re-loadable prepaid card, a debit card and a credit card.  That might be valuable context for my answer.

Credit cards

Credit cards are a true extension of credit. You have to apply for them. They have to be approved. The lenders pull your credit reports and credit scores. They have a due date, a balance, a credit limit, an interest rate and a grace period. These cards are almost always reported to the credit bureaus.

Prepaid debit cards

A reloadable prepaid debit card is not a credit card and isn’t an extension of credit.  In fact, they’re more similar to gift cards you get for Christmas than they are similar to a credit card.

Prepaid debit cards are often loaded with fees.  Many companies charge fees for activating the card, for loading money on it, for each transaction, a monthly fee, an annual fee, for withdrawing money, for balance information, and for other account information.  Even though your money has been loaded onto the card, you still have to pay to get it!  You can reuse the card by loading money onto it, but when the funds are gone, you can’t use the card.  There are no non sufficient funds fees (NSFs) or overdrafts fees, your transaction is declined.

Also, read >  How Reworking Your Budget Can Boost Your Credit Score

Debit cards

A debit card is directly connected to your checking account, so the funds are withdrawn from your checking account when the card is used.  The risk with checking accounts is not keeping track of your withdrawals, which results in bounced checks. You can be protected against bounced checks, but you still pay a fee for the service, but you don’t have the reversal fees from the company you are paying.

Some reloadable prepaid cards have been marketed as helping to build credit, but that is not true.  They are not considered a loan or extension of credit; they are not reported or included on the credit report.  On the other hand, they can’t harm your credit either.

Debit cards are linked to checking accounts, but checking accounts are not reported to credit bureaus.  Debit cards can harm your credit if you overdraw your account and don’t pay the amount due to the bank.  If the debt is turned over to a collection agency, the debt is reported as a collection and will harm your credit.

JRU on 60 Mins SetCredit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.