Just noticed something interesting about how younger people are trying to build credit these days. Turns out debit cards that build credit are becoming a thing now, and honestly, it's worth paying attention to.

So here's the backdrop: credit card debt in the US hit over a trillion dollars, and interest rates have gotten brutal—APRs are sitting above 20% on average. Meanwhile, student loans are back in the picture after that three-year pause. Young people are getting hit from multiple angles, and a lot of them have never actually experienced rates this high. Makes sense why alternatives are popping up.

The pitch from these new debit cards that build credit is pretty appealing—you get the credit-building benefits without the risk of a traditional credit card. No interest rates, no debt spiral. Three main players: Extra, Sesame Cash, and Fizz. Let me break down how each one works.

Extra connects to your bank account and sets a spending limit based on your balance. No credit check required. It reports to Equifax and Experian every 30 days. The catch? Membership fees—either $20 a month or $149 a year if you just want the credit-building features. Add rewards and you're looking at $25/month or $199/year. Also can't withdraw cash like a normal debit card.

Sesame Cash is more involved. You're basically opening a checking account with a prepaid Mastercard that ties into a secured line of credit. It reports to all three bureaus monthly. The fees are lower but there are requirements—either direct deposit $500 monthly or spend $1,000 a month to avoid fees. There's also a $3 inactivity charge if you're not using it regularly.

Fizz is the simplest option and it's free, which is huge. No fees at all. Only works on iOS right now though. Your purchases get paid through Fizz initially, then pulled from your checking account. Reports to all three credit bureaus at month-end.

Do these debit cards that build credit actually work? Early data suggests yes. Extra's research showed users averaged a 48-point credit score increase over a year, and their approval odds for auto loans and credit cards basically doubled. Sesame Cash reported 35-point increases on average with 90% of thin-file users hitting around 607 in their first month.

But here's where it gets interesting. Financial advisors are skeptical about whether the value actually stacks up. Secured credit cards and student credit cards are still cheaper alternatives—many come free or at minimal cost. If you're young or have rough credit, a student card with a low limit might be the smarter play. You get the credit building, rewards, and you're learning responsible spending habits without paying membership fees.

The real issue: people who need credit building often can't afford the fees on these debit cards. That's a pretty big contradiction. Traditional secured cards require a cash deposit but no ongoing fees. Student cards are designed specifically for this situation.

If credit cards aren't your thing at all, there are other paths—paying auto loans or student loans on time, using rent-reporting services. The credit-building debit card space is interesting as an option, but it's not necessarily the best option for everyone.