Building your credit history early on is one of the best things you can do for yourself financially. The earlier you start, the more time you will have to build solid credit and demonstrate your creditworthiness to lenders. A high credit score means lower interest rates for things like mortgages and auto loans, and better financial offerings. So, it is important to start building credit sooner than later on your road to financial stability and independence.
While the legal age to sign up for your own credit card is 18 years old in the U.S., getting a credit card before age 21 can be tricky. Here is a quick guide to credit card requirements and options for first-time credit applicants.
- To open a credit card under your own name in the U.S., you need to be at least 18 years old. Depending on the credit card issuer, some will allow you to become an authorized user on someone else’s account as young as 13.
- While you can apply for a credit card on your own at 18, getting approved for one if you are under 21 can be quite tough and may require a co-signer or proof of income.
- After you turn 21, these requirements will be less strict, though the likelihood of your application getting approved by creditors will still heavily depend on your credit health and history.
Credit Card Age Requirements What Age Can You Get a Credit Card?
Because a credit card requires signing a contract, you need to be at least 18 years old to open your own card. But, due to the Credit Card Accountability Responsibility and Disclosure Act of 2009, if you are between 18 to 20 years old, you may face stricter verification requirements, including showing proof of income to verify your ability to repay your debt. Once you turn 21, you will no longer be bound by these restrictions, but card issuers will likely still review your income.
Having independent income, whether from your part-time job, commission checks, side hustles, etc., protects you from taking on more debt than you can handle. If you do not have any money coming in every month to your bank account, your debt can quickly snowball due to high interest rates and become impossible to manage. If you cannot show a source of income, you may need a co-signer, guarantor, or joint applicant to help you qualify for the credit card. But, note that not all lenders will allow co-signers, guarantors, or joint applicants. Alternatively, you can try to apply for a secured credit card, which typically requires you to put down a security deposit equivalent to your card’s credit limit.
3 Signs You are Ready For a Credit Card
Here are 3 signs to gauge whether you are ready for your first credit card:
- You are good at sticking to your budget: If you are getting a credit card for the first time, it may feel like you are receiving free money because you are not handling physical cash when you make purchases. It is crucial to remember that your credit is a loan and not free money. So, if you cannot pay it back, you will owe interest on top of the principal amount you borrowed. That is why creating a budget and stay on top of it every month is important, as that ensures you do not overspend with money you do not have.
- You want to start building a positive credit history: Lenders are more likely to give you a loan and better terms and conditions if they see that you have a good credit history. Your credit history also plays a large role in your credit score calculations, which affects the type of loans and rates you qualify for.
- You have a stable income: To maintain good credit, you should aim to make enough independent income to cover your credit card bills on time and in full each month. If you miss a single payment or make a late payment, that could seriously hurt your credit.
Options for Your First Credit Card Account
Whether you are a college student, in trade school, or a working professional, if you are a first-time cardholder, you should look for cards like secured credit cards, student credit cards, or other cards designed for people who don’t have a credit history. These will be much easier to get approved for and allow you to start building your credit history.
Secured Credit Card
A secured credit card works like any other credit card but requires you to put down a security deposit that equals your spending limit. Doing so protects the issuer in case you do not pay your bill. Because the issuer knows you are more likely to repay your debt, they are more likely to approve you for a secured card than an unsecured one. That also means that you can’t overspend and get into more debt.
A secured card gets reported to the major credit bureaus, so using it responsibly will help improve your credit score over time. Make sure to keep balances low – around 30% of your available limit – and pay off the balance on time every month. Doing this will help improve your credit score over time and enable you to get approved for unsecured credit cards and other lines of credit.
Student Credit Card
Student credit cards are designed for college students, specifically people in the 18- to 22-year-old range with limited or no credit history. They tend to be easier to qualify for than most credit cards and often have lower credit limits, though they may come with higher interest rates. Depending on the card, they may even offer benefits that are more relevant to students.
Before applying for a student credit card, read the terms and conditions carefully. Ask questions about things like annual fees, interest rates, and late payment penalties. And be sure to only charge what you can afford to pay back each month. If you use your student credit card responsibly, it can be a great tool for building your financial future.
A co-signer is someone who signs a credit card application with the primary applicant, such as a family member or close friend. This person agrees to be responsible for the debt if the primary applicant cannot pay. In other words, a co-signer is essentially vouching for the primary applicant and has legal and financial responsibility for debt repayment.
There are a couple of reasons someone might choose to have a co-signer on their credit card. One reason is that it can help them get approved for a card they would not otherwise qualify for on their own. Having a co-signer also means that the primary applicant will have access to more credit, which can come in handy in an emergency.
Note that being a co-signer carries some risks as well. If the primary applicant fails to make payments, the debt will fall on the shoulders of the co-signer. In those situations, if the co-signer does not have the means to pay off the balance, this could damage their credit score and make it difficult for them to borrow money in the future. Not all banks allow co-signers, so check in with the credit card issuers beforehand.
Authorized User Card
If you do not want to go through a lengthy credit card application, becoming an authorized user is an easy way to get access to a credit card quickly. Authorized users are not responsible for paying off debt on a credit card, nor will their credit be evaluated during the loan application process. Instead, they usually get added to an existing account by a parent, guardian, close friend, or other family members.
Authorized users will get charging privileges, and most credit card issuers will report the card’s payment history to their credit reports (though not all will). However, they do not get some of the additional benefits of being a cardholder, like rewards points or account management controls.
Keep in mind that with authorized users, the original cardholder is the one who will be held liable for repayment. So, authorized users only get access to whatever privileges are given to them by the cardholder, which the primary account owner can revoke at any time. But, late or missed payments could affect both the primary cardholder and any authorized users. So, it’s crucial to set boundaries and spending guidelines early on to mitigate some of these potential problems.
Applying for Your Own Credit Card Account if You are at Least 21
If you are at least 21 years old, you can apply for a credit card on your own and will likely have better credit card options, especially if you had a student credit card before or were an authorized user on an account. However, most credit card companies will still look at your credit reports and history, as well as your income.
When I applied for the Chase Freedom Flex last year, my application was initially denied because they could not verify my income. I had to prove independent income by submitting copies of my paychecks and offer letter detailing my annual salary to get approved and open the credit card account.
When choosing a credit card, consider what type of rewards program would best fit your needs and shop around for cards that suit your everyday purchases. For example, some cards offer cash back on specific purchases like restaurants and gas, while others give points that you can redeem for travel or other premium rewards. Other factors to consider include secondary benefits such as travel insurance and protections, interest rates, and annual fees.
Getting a Credit Card If You’re Younger Than 18
If you want to build your credit history early on, you can ask your parents to add you as an authorized user on their card. For example, Discover allows authorized users aged 15 and older to get added to an account with no additional charge. Note that this will depend on the credit card issuer. Have your parents call customer support or check the card’s terms and conditions to find out if there is a minimum age requirement for authorized users.
Parents should weigh the pros and cons carefully. One pro of giving a teenager access to a credit card is that it helps them learn how to handle money responsibly. A credit card allows teenagers to make purchases and then pay for them over time. That teaches them how interest rates work and how long it takes for payments to clear. It also helps them develop good spending habits early on in life. Another pro is that it builds their credit score early on.
However, there are also some cons to giving teenagers access to plastic money. If they misuse their card, it could damage their credit score permanently. If they go into debt or do not pay off their balances, their score will drop significantly. That could make it difficult for them when they try to apply for loans later in life. Another downside is that it can lead to overspending. When teens have access to budget-free money, they might not think about the consequences of buying things they don’t need.
How to Start Building Credit
When you get a credit card for the first time, it can be tempting to splurge and spend more than usual. We recommend only using your card for purchases you are certain you can pay off when the bill comes. Additionally, make sure to keep your credit utilization ratio low and avoid carrying a balance every month. One trick I used in college to keep my utilization ratio low was to pay off part of my balance before the end of the billing period to lower the amount that appeared on my statement. If you have the funds to do so, this step will ensure that you do not max out your credit line.
As you start getting the hang of things, you can eventually apply for more credit cards and upgrade to a credit card that suits your lifestyle better. Shop around for cash-back credit cards, travel credit cards, retail credit cards, etc. to find the right card for you. Over the last several years, I have applied for 3 credit cards, each of which comes with different rewards programs and benefits. Taking the time to develop a good credit history will give you opportunities to apply for credit cards with better rewards, rates, and welcome bonuses.
But, before applying for another credit card, it’s a good idea to check your credit scores to make sure you are in good standing and do not have any issues with your credit reports. You can get free copies of your credit reports from the three major credit bureaus, including TransUnion, Equifax, and Experian, at AnnualCreditReport.com.
The Bottom Line
Regardless of what credit card you are applying for, having a credit card account comes with new financial opportunities and responsibilities. Make sure you use your credit responsibly and do not overspend. Developing solid financial habits early on will set you on the right path for excellent credit and financial independence.