In order to study the role of Fe content on the damage mechanisms of Al-Si-Cu alloy on a microstructural level, a Digital Image Correlation (DIC) method has been developed and performed on two Al-Si-Cu alloys: a high-Fe alloy (0.1 wt.% Fe) and a low-Fe alloy (0.8 wt.% Fe). Tensile tests on flat specimens have been performed, and a Questar long distance microscope has been used for the in-situ observation during tensile tests. The field measurements allow to identify and track the development and localization of deformation, and the fracture surfaces of the tensile specimens are analyzed using Scanning Electron Microscopy and Energy-Dispersive X-ray spectrometry (SEM-EDX) to identify the damage mechanisms. The results show that crack initiation occurs through the fracture of hard inclusions, i.e. Si particles, iron-intermetallics and Al2Cu particles in the high stress concentration region. Cracks often propagate through the fracture of hard inclusions rather than by their decohesion from the matrix.