The best time for young people to get a credit card is when they are old enough to qualify for a credit card and responsible enough to manage a small amount of debt.
Credit cards can offer several advantages to improve a young person's financial health. They can provide a convenient way to make purchases as well as a way to build credit. Many credit cards are designed for new borrowers with little to no credit history, like young people. Learn more about when a young person should get a credit card and how the process works.
Key Takeaways
- For a young child, a debit card linked to a checking account may be a better option than a credit card.
- For older children, consider a low-limit credit card in a parent's name with the child added as an authorized user.
- At college age, the child may be eligible for a student credit card, which typically has low limits.
- Young adults who have never had a credit card may need to start with a secured credit card.
Young people have several financial products that are similar to credit cards or types of credit cards. Each type of credit has pros and cons, and some are more appropriate at certain ages than others.
High School Age
Teens who are introduced to the concept of handling credit may be better prepared for using credit cards responsibly in their adult years. A high-school age teen may be too young to have a credit card, however.
As an alternative, some experts recommend opening a youth checking account with an attached debit card at this age. They can then start to learn how to monitor the balance in the account and use their debit card wisely without risking going into debt.
After they learn to use the debit card, they can move on to potentially being added as an authorized user to an adult's account. If the child is under 18, the card will generally have to be in a parent's name, with the child listed as an authorized user.
Risks to consider
High schoolers can be tempted to spend more on their credit cards than they can afford to pay back, especially if they are not familiar with the consequences of carrying debt. Plus, if the child is an authorized user on a parent's card, their overspending could reflect poorly on the parent and impair their credit score.
Late Teens / Early 20s
At age 18, you may be eligible for a credit card in their own name. If you don't have a credit history by this time, getting a card now will help you begin to establish one. That will be important down the line, when it comes time to rent an apartment or apply for a mortgage.
Many credit card issuers have cards specifically designed for college students that has lower limits but easier approvals. Starting with a student credit card can help you build credit as your payments are reported to credit bureaus. Shop around and compare rates and terms in various student credit cards.
Risks to consider
If you have never had a debit or credit card when you are in your late teens or early 20s, it might be safer to start with a debit card linked to your checking account. Many student credit cards have high interest rates, so it's easy to run up debt, especially if you miss a payment or two.
Continuing to pay with cash or debit will help you avoid debt. Starting adult life with a load of high-interest debt and/or a poor credit history puts young adults at a major disadvantage as it makes it more difficult to qualify for other loans like auto loans or mortgages.
Important
Paying bills on time and minimizing debt are two of the most important factors in building a strong credit score.
Mid-20s
Getting a credit card is an easy way to establish a credit history and begin to build a solid credit score. Plus, a credit card is sometimes required for things like renting a car or booking a hotel room.
Young adults who don't have enough of a credit history to get a conventional credit card can start out with a secured credit card. It requires a deposit that serves as collateral and as the credit limit on the card. After you've used a secured card for a while—and made all payments on time—you may be eligible for a regular, unsecured credit card.
At any age, young adults should follow the rules for earning and keeping a high credit score. Credit scores are based on several factors, the two most important of which are payment history, or how you've made payments on time, and credit utilization ratio, or how much of your credit you are using.
Having a good credit history is also important for other purposes, such as setting insurance rates, renting property, and even getting a job.
Risks to consider
If you believe you will have difficulty managing debt, you might want to forgo getting a credit card until you establish responsible financial habits. You can always delay getting a credit card and rely on cash and debit cards to avoid getting into debt.
Is There a Benefit of Getting a Student Credit Card?
The main benefit to getting a student credit card is that it can provide a way to start to build credit history. While you may have a lower spending limit, a credit card company will report your payments to a student credit card to the credit bureaus.
Do Authorized Users Build Credit?
When you are added to another person's primary account as an authorized user, you will benefit if they are a responsible borrower. As they make payments on time, those on-time payments will also be reported to the credit bureaus under your name as well, helping you build credit.
How Much Money Can You Put on a Secured Credit Card?
You can usually put between $500 and $2,000 on a secured credit card. Then, that amount works like the credit line, and you can spend up to that limit on that card.
The Bottom Line
Credit cards are a fact of financial life, and for many people, the benefits of using them outweigh the drawbacks. When someone should get their first credit card will depend in large part on how responsibly they (or their parents) think they will handle it. While establishing a credit history is important, a bad credit history, marred by youthful mistakes, can be worse than no credit history at all. So there's no rush. If a young person isn't ready for a credit card yet, it's fine to wait until they are.
