Extra Card review: A debit card to improve your credit score

For many, having a good credit score is essential to achieving many financial milestones in life, whether that's securing a lower interest rate on a loan or getting a higher credit limit on your credit card. Credit cards are one way for people to boost their credit score with their everyday purchases. 

However, qualifying for a credit card often requires a good credit score, so it can be difficult to start building your credit. However, fintech companies have been working on innovative solutions to help build your credit score outside of traditional methods.

Extra Card has created a debit card that allows people build credit without a credit check or a high credit score to qualify. Below, Select looks at how Extra Card works and the different features it offers.

Extra was founded by Max Hellerstein, Cyrus Summerlin and Biren Shah in 2020. Extra works kind of like a charge card. With a charge card, cardholders are unable to carry a balance from month-to-month and are required to pay their balances off in full after an interval of time, usually every 30 days. 

With Extra, cardholders make a purchase and Extra pays off the merchant at the time of transaction. However, Extra connects to your checking account, so one day after you make a purchase, Extra takes the money from your bank account for that transaction.

At the end of the month, Extra then reports your card transactions to the credit bureaus Equifax and Experian. Extra does not currently report to Transunion.

Extra is in communication with Transunion about its information being added to Transunion's credit reporting, says Max Hellerstein, Co-Founder and CEO of Extra Card.

By reporting cardholder's payments to Equifax and Experian, the Extra Card can have a positive impact on your credit score as reported by those two bureaus.

Using an Extra Card can impact your credit utilization ratio, too. The credit utilization ratio is the ratio of credit you're using to the total amount of credit you've been extended. Your credit utilization ratio impacts the 'amount owed' category of your FICO score. The 'amount owed' category comprises 30% of your credit score. Experts recommend keeping your credit utilization ratio under 30%, or even 10% if you can.

Since the card is paid off daily, your credit utilization ratio will reset each day, says Hellerstein. When your credit utilization ratio is reset frequently, you're more likely to have a low utilization ratio. Having a low utilization ratio also has a positive impact on your credit score.

The Extra Card charges no APR or interest because you have to pay off your balance daily. And unlike a credit card, Extra won't let you spend more than you have in your bank account, so you won't have to worry about overspending and potentially going into debt.

In order to qualify for an Extra Card, you don't need a credit score either. Extra doesn't perform credit checks but potential cardholders must meet these requirements:

• Applicants must be 18 years of age, or older
• You must have an SSN or ITIN number
• Applicants must have a US address where you can receive your Extra Card (P.O. boxes are not valid)
• Have a checking account at one of 10,000 select U.S. banks
• Have an iOS device (iPhone or iPad) or an Android device running version 10 or later

According to Hellerstein, 99% of applicants are approved for the card because all transactions on the card are backed by cash. When cardholders sign up for Extra, they are given a spending limit based on the real-time balance of the bank account they choose to connect, says Hellerstein. 

Extra charges either an annual or monthly fee for cardholders. For Extra Credit Building you'll pay $8 a month but if you're willing to pay for the entire year upfront you'll get a slight discount and pay $84. For Extra Credit Building and Rewards you'll pay $12 a month or $108 for the entire year. 

For the higher price, you'll gain access to the Extra Rewards program. Cardholders will earn 5 rewards points for every $1 they spend. Five rewards points are worth up to 1 cent, so the redemption value is a only 0.2 cents per point. Essentially you're getting 1% back on all purchases if you redeem your points for max value.

Extra has a rewards store available through the Extra App, but the offerings in the store vary. According to Hellerstein, recent popular items in the store include an electric toothbrush, card games, gift cards and AirPods. Since Extra is a debit card focused on building credit, it's unsurprising that it offers few rewards and little flexibility in how cardholders can redeem their points.

The Extra Card cannot be used internationally, so there is no foreign transaction fee.

Extra's fees can be quite a hefty price to pay for trying to raise your credit score. You might consider alternatives like a secured credit card, which requires that you put down a deposit that acts as collateral if you don't pay your bills. Typically, your credit line is equal to the amount of your deposit. Secured cards are much easier to be approved for if you have bad or no credit.

When Select analyzed various secured cards to determine which cards were the best for people with no credit or bad credit and who wanted to improve their scores, it ranked the Discover it® Secured Credit Card as the winner. 

With the Discover it® Secured Credit Card, cardholders only need to put down a minimum $200 deposit for a credit line equal to that amount. Starting seven months after account opening, Discover will evaluate your credit card account to determine if you can transition to an unsecured line of credit. 

If you don't want to put down a deposit, you might consider the Petal® 1 "No Annual Fee" Visa® Credit Card, which is catered to people with non-prime credit looking to improve their scores.

The Petal 1 Card has no annual fee, no welcome bonus and earns between 2% - 10% cash back at select merchants. With the Petal 1 Card, you'll have to make your monthly payments each month in full or risk having to pay interest. Unlike the Extra card, the Petal 1 Card reports to all three credit bureaus, has no annual fee or foreign transaction fee (unlike Extra, the Petal 1 can be used abroad). 

Additionally, unlike the Extra Card, the Petal 1 Card is a credit card, so you'll have an entire month to pay off your bill. 

The Extra Card can be a useful tool for people who aren't eligible for most credit cards but are looking to boost their credit scores. However, the card does have an $8 monthly fee or an $84 annual fee, so you might be better off getting a secured credit card with no annual fee in order to build your credit.

Secured cards will require a security deposit, but you'll typically receive the deposit back and will be eligible for an unsecured card after making your payments on time and in full for a few months. Extra Card also has downsides: Your card history is not reported to all three credit bureaus and it can't be used in foreign countries.

Correction: The quotes from Extra CEO Max Hellerstein were misattributed to Extra Director of Communication Sloane Wimberly in a previous version of the story.

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Petal 1 Visa Credit Card is issued by WebBank.

For rates and fees of the Discover it® Secured Credit Card, click here.