Rolling contact fatigue cracks and thermally induced defects are common problems in the railway industry especially as demands for increasing loads, speeds, and safety continue to rise. Often, the two types of defects are found together in the field, however, whether one causes the other to occur is not completely agreed upon. The effect of thermal damage, in the form of a martensite spot on pearlitic steel test bars, on the fatigue life in uniaxial low cycle fatigue experiments was investigated by the authors. However, the focus of the current work was to characterize the damage evolution from the low cycle fatigue (LCF) tests and correlate the crack initiation and propagation with the initial thermal damage. Residual stress measurements, digital image correlation, and X‐ray tomography were used to characterize the effects of the thermal damage before, during, and after fatigue testing, respectively. It was found that the thermal damage causes strain accumulation and crack initiation at the interface between the two materials. The strain evolution was visualized using digital image correlation (DIC), clearly showing the strain concentrations at the top and bottom of the white etching layers (WEL), where the residual stresses are also most tensile. X‐ray tomography confirmed the planar crack growth from the martensite spot.