Building your credit score is one of the most important parts of becoming financially successful. Even if you’re extremely debt-averse, a great credit score can serve you. It will lower your car insurance rates, make it easier for you to rent a new apartment, and eventually make it possible for you to build wealth through real estate investing. As far as I know, there is only one way to build your credit score without paying interest or fees. The way to do it is to open a credit card, use it, and pay it off each month.
Unfortunately, this method of building your credit score is fraught with missteps. Some people accidentally shoot themselves in the foot by running up credit card bills that they can’t pay down. Others never use their credit cards out of fear, and thereby miss out on building credit.
If you’re worried about using a credit card to build credit, you’re a perfect candidate for the Debx app. This app allows users to shift debit card spending to credit card spending without spending money you don’t have. Debx makes daily payments from your checking account to your credit account, so you maintain a low credit utilization while still maintaining the benefits of credit card use.
Think the Debx app makes sense for you? Here’s what you need to know about it. Check out the Debx app here for free to get started.
Note: On September 14, 2018, Debitize acquired DebX. We don't know what the current plans are for the Debx App, but will update the review as we get further information.
Using Credit Cards Is Risky - But Valuable
Ever since reading the book, I Will Teach You To be Rich, I became a huge proponent of using credit cards for most spending. If you pick the right credit card, you not only receive cash or points when you spend, you also get important protections such as free manufacturers’ warranties, collision damage waivers for rental cars, purchase protection, price protection, and return protection.
That’s not to mention the second-to-none fraud protection offered by most credit cards. If your card is stolen or used fraudulently, you're not liable. And while the same is true with a debit card, the difference is the money is already missing from your checking account - versus a credit card, where you don't pay the bill at all. It can take weeks to get the money back if you get your debit card stolen, and that can be financially devastating.
But credit card spending is risky. If you pay late, you risk hefty penalty fees (and increased interest rates). If you overspend, you’ll end up spending months or years paying interest instead of building wealth.
Plus, in the early stages of credit building, it’s easy to mess up your credit by spending too much of your credit limit. That is to say, if your total credit limit is just $500, spending $400 will increase your credit utilization ratio to 80%, which will hurt your credit score, even if you go on to pay down the credit card at the end of the month.
When you understand the value of credit card spending (not credit card debt), the case for Debx becomes pretty clear.
How Debx Reduces Risk Without Eliminating Value
With the Debx app, you can enjoy the value of credit card spending without any of the risks associated with it. Debx does that by converting credit spending into daily debit spending.
How does it work?
You simply hook up your credit cards and your bank account in the app. This takes just a minute or two. Once you’re connected, Debx makes daily payments from your checking account to your credit card. This reduces your credit utilization ratio, eliminates any fear of late fees, and allows you to enjoy the rewards and protections of credit cards.
Within the app, you can also pay off any old balances if you want. Since I only had a few transactions that needed to be paid, I decided to pay through the app. It worked out great for me.
If you’re worried that Debx might cause you to overdraft your checking account, you can set rules that define when Debx won’t make the payments. The two rules include “autopay” where you instruct Debx to pay all purchases under a certain dollar threshold. Purchases over that threshold can be manually paid either through your credit card bank portal or via the Debx app.
You can also set a “Shutoff Payment” rule where Debx stops making daily payments when your checking account balance drops below a certain level.
These easy to understand rules will help you maintain confidence with your cash flow, while still maximizing the potential of Debx. By the way, if Debx causes you to overdraft on your account, it will refund the overdraft fee.
It’s also important to note that Debx isn’t just a credit card paying tool. It’s actually an app that can help you see your actual cash position. Debx does that by comparing your current checking balance to any planned credit card payments to show a “true checking balance.” This makes it way easier to prevent overspending.
How Much Does Debx Cost?
Debx is a completely free app. You don’t pay anything, even if you want to hook up a ton of credit cards to the app. You don’t have to open a new bank account or credit card to start using Debx.
Because Debx is actually free, I’m quick to recommend it to anyone building credit, people who struggle with overspending on credit cards, and credit card rewards junkies who don’t always keep careful track of their credit cards that carry annual fees (guilty).
Debx also works for people who have credit card debt and are working to pay it off. However, people who have credit card debt already should consider using Debx a bit differently.
What If I Already Have Credit Card Debt?
One of the first rules of credit card debt is to stop spending on your credit cards (think Dave Ramsey's baby steps). With Debx, you can continue to spend on the credit cards, but stop accruing debt. Debx will automate future payments according to the rules you set up in the app. It will also categorize previous transactions as unpaid and you can pay them right in the app for all your accounts.
Personally, I would recommend using a combination of automated payments outside of the Debx app, and the Debx app to pay down existing debt. Debx will keep you from going further into debt, but you should work on destroying credit card debt by setting up automated monthly payments. Make the automated monthly payments as big as your budget can handle.
Debx is a great new app that allows you to get all the benefits of using a credit card, with the ease of making payments on it instantly like a debit card.
The pricing is great, it's pretty easy to use, and the only thing we think is lacking is more automation around making payments. While it does have auto-pay, we wish there was more automation around this.
Overall, it's free - so give it a shot. Check out Debx here.
- Pricing - 100
- Ease Of Use - 80
- Customer Service - 80
- Features and Tools - 80
Debx is an app that allows you to use your credit card like a debit card.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.