Why You Shouldn’t Get Too Excited About Suze Orman’s Debit Crusade

by Miranda Marquit · 7 comments

If you haven’t heard, financial guru Suze Orman recently submitted a Change.org petition that encourages Congress to require banks to submit debit card information to credit bureaus.

This has been a crusade of Orman’s for a while now. Back when she released her branded pre-paid debit card, the Approved card, she said that TransUnion would examine and consider the debit information. It wouldn’t impact credit scoring, however; it would just be an experiment to see if debit transactions mattered.

That being said, don’t hold your breath. Credit bureaus are all about evaluating your credit transactions. They want to figure out how likely you are to repay a loan — not evaluate if you’re responsible when using your own money.

Debit vs. Credit

Orman isn’t the only person who thinks that non-credit items should have a place on credit bureau reports. There’s also a push to include factors like rent and utility payments. In some ways, this makes sense. After all, these are transactions that require regular payment and attention to detail. The regular payment of your rent and utilities might indicate you can handle making regular debt payments.

On the other hand, debit is a different situation altogether. Even though a debit card is emblazoned with a credit card payment processor logo, and even though you can sign for the purchase, the reality is that you’re spending money you already have. You’re not borrowing to make your purchase, so you know you have a finite amount of money to spend.

Plus, with debit, there aren’t regular payments to make. You receive your income, then spend it as you wish. It’s not a matter of paying (or not paying) your bills. As a result, it doesn’t have much of a bearing on your level of responsibility when it comes to credit.

What About Privacy?

If Orman’s petition is adopted, the biggest issue is that it would be about more than just swiping your debit card. Your overdrafts at the bank, your balance, and the last time you added money to your savings account might all be considered.

This leads down a slippery slope where individual transactions might be scrutinized. Some credit card issuers got into trouble a few years ago for using individual transactions (like trips to the salon or the purchase of re-tread for tires) when making decisions about interest rates and other items.

Some worry that Orman’s plan could mean a greater focus on each individual financial transaction you make. Are you really ready for your expensive night on the town to impact your credit?

What do you think of this idea? How do you think creditworthiness should be determined?

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{ read the comments below or add one }

  • Ross says:

    Hi G,G,,
    Not to be facetious but it’s getting to the point that more people might start stuffing their money in mattresses, as this may be one of the only way that some feel that they can keep their finances private.

  • GG says:

    I think it’s a horrible idea. We’re getting to the place where nothing is private.

  • Ross says:

    I think that it is a bad idea to push forward legislation that will monitor debit transactions as credit worthy. It’s all too unfair to persons struggling to improve their financial situations to have their credit score fall because they may not be savvy or capable of using debit cards “wisely”.

  • Your entire financial situation, payment shall be accounted for in order to create an accurate credit dignity principle. Suze right on that.

  • I do not think debit card transactions should be reported to the credit bureau either simply because it has nothing to do with one’s credit worthiness. However, reporting utility and rent payment history is definitely a great idea.

  • I’d like to do some more research, but at first glance, I don’t support this idea. I have a good credit score (and a lot of available credit) because I have shown I can pay off my credit cards, which are short term loans, on a monthly basis. As you’ve pointed out, using a debit card is not a loan. It’s your own money. I believe improvements need to be made to our credit system, but I’m not sure this is it.

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