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It's important to set up good financial and credit habits at an early age. If teenagers learn the right way to manage credit, they will pick up habits that will serve them well for many years. To start out with the right approach to credit, teens should use a simple credit card that has terms and conditions that are easy to understand.
What Makes a Credit Card Good for Teenagers?
The ideal credit card for teenagers is a simple card that can be used to build credit history while avoiding debt. For teenagers who are enrolled in school, there are several credit cards designed just for college students. For teenagers who aren't in college, there are also plenty of other simple credit cards available that can be ideal for building credit.
One way teens can simplify their use of credit cards is to choose one that's offered by the same bank or credit union that holds their checking or savings accounts. By doing so, they only have to log into one account (and memorize one password). Making payments become a simple matter of transferring funds between accounts, not between institutions.
What are the Rules for Teenagers and Credit Cards?
Many credit card issuers allow teenagers to become authorized users on their parents' credit cards. An authorized user can make new purchases, but the primary account-holder is solely responsible for repayment. Authorized users may have less access to the account online and may not be able to view statements or redeem rewards.
Once a person turns 18, he or she can apply for a credit card as the primary account-holder. However, the CARD Act of 2009 requires applicants under the age of 21 to show proof of income before an account can be approved. This law prevents card issuers from extending a line of credit to young adults who don't have the means to repay a loan.
Finally, young adults often have a limited credit history and thus are not able to qualify for the most competitive reward credit cards. Instead, they can apply for student cards or other basic-entry level products that don't require an extensive credit history for approval.
Top Credit Cards for Students
This card offers cash-back rewards and is great for teenage students who are learning how to use credit. Students can earn 1% cash back on all purchases, and another 0.25% when they make their monthly payments on time, for a total of up to 1.25% cash back. You also get access to a higher credit line when you make your first five payments on time. Other cardholder benefits include a 24-hour travel and emergency assistance hotline, and automobile rental insurance. There's no annual fee for this card and no foreign transaction fees.
This card offers students 2% cash back at gas stations and restaurants, on up to $1,000 in combined purchases each year. You earn 1% cash back on all other purchases. Discover also offers cash back for earning good grades. Students can get $20 cash back each school year that their GPA is 3.0 or higher, for up to five years. Finally, Discover matches all of the cash back you earn during your first year.
Points can be redeemed at any time and in any amount as statement credits or as a direct deposit to your bank account. Rewards can also be used to pay for purchases on Amazon.com or to buy gift cards. In addition, this card offers a free monthly FICO® Score. There's no annual fee, no foreign transaction fee, and no penalty interest rates.
This card offers students 2,500 bonus points after they use their card to spend $500 on purchases within three months of account opening. These points are worth $25 toward merchandise, gift cards, travel reservations or other rewards. You also earn double points on dining and entertainment purchases and one point per $1 spent elsewhere. There's no annual fee for this card.
Simple Credit Cards for Teenagers and Other Young Adults
The last thing that new credit card users want to worry about is maintaining a complex relationship with their credit card issuer. The Citi Simplicity® Card offers streamlined terms and conditions with no late fees, no penalty interest rates, and no annual fee. Benefits include Citi Identity Theft Solutions, travel and emergency assistance, and Citi's Price Rewind service.
This card offers a unique social media community that can appeal to teenagers who have been interacting online this way their entire lives. Barclaycard Ring® cardholders interact with each other, along with Barclaycard product managers, as part of the Barclaycard Ring community. Members can discuss issues related to credit cards all while voting on changes to the card's terms and conditions. Furthermore, the card offers exceptionally low-interest rates (13.99% variable as of October 2018), as well as low fees for balance transfers and cash advances. There is no annual fee or foreign-transaction fees on this card.
With no fees of any kind, including annual fees, foreign transaction fees, late fees, and even cash-advance fees, this card is as simple as it gets. The Pentagon Federal Credit Union was created to provide financial services to members of the military, defense, and government organizations. To apply, you must join the credit union based on someone in your household's membership in one of these organizations or by joining a qualifying military support group for a one-time fee of as low as $15.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on October 30, 2018, and has been updated.