Chromium (Cr)-coated Zircaloy fuel cladding has been considered a promising candidate materials system for accident tolerant fuels. In this work, two types of Cr coatings produced by cold sprayed (CS) and physical vapour deposited (PVD) methods were studied. In particular, a novel combination of C-ring compression tests at room temperature (RT) and 345 °C in an inert gas environment and real-time X-ray micro-computed tomography (XCT) imaging was adopted to investigate the failure processes. Before testing, the crystal structure and local properties were fully characterized; post testing, ex situ scanning electron microscope (SEM) imaging were conducted to complement the XCT measurements in crack density. It was found that the failure processes in both coatings vary with temperature, as discussed in detail. The hoop strength of first coating cracks’ formation of CS materials were higher than the PVD materials due to their higher interfacial roughness and distribution of splatted grains in CS coating. Based on a calculation of the first Dundurs’ parameter from the measured local properties and observed crack arrest/deflection at coating/substrate interface, it was found that the cold sprayed coating-cladding material system has a higher interfacial toughness in terms of critical strain energy release rate due to its interlocking interfacial structure.