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Wondering if it's finally time to get a credit card of your own? It might be. The best age to start out depends on the right mix of hitting legal milestones, meeting a credit card issuer's qualification requirements, and being sure you can use the card responsibly. If you're like most people, eventually you will get a credit card, and when you do, you'll have to handle it wisely.
According to Experian data from the fourth quarter of 2018, some 61% of 18-year-olds have at least one credit card—with an average balance of $3,914. That's a lot to owe when you're just starting out in life and may not be earning enough money to pay down the debt quickly.
Here's how to determine when the time is right to get your first credit card.
When Should I Get a Credit Card?
Your age is an important factor in knowing whether you should even bother to apply for a credit card. To sign a contract—which you'll do when you apply for your own credit account—you have to be at least 18 years old.
Yet there's another legal hurdle you'll have to clear, and that's the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or Credit CARD Act. It was enacted as a protective measure against the very real problem of young adults getting in over their heads with credit cards. Before this law, college campuses had been thick with credit card company representatives passing out swag to students in exchange for completed applications.
It was an attractive and easy way to get a credit card. That all changed with the Credit CARD Act. Now, if you're between the ages of 18 and 21, obtaining an unsecured credit card by yourself can be a challenge. You'll have to submit proof that you have the independent means to manage the minimum payment. So if getting a card in your own name is your goal and you have a steady job that satisfies the income requirement, you're free to do it.
If you don't have the means to pay for the debt you could incur with the card, an option is to ask someone with a good credit rating and sufficient income to cosign the application. Not all credit card issuers will allow two people to be on an account, but if you find one that does, you and the cosigner will be equally liable for any debt, and the account will appear on both of your credit reports.
You should also be confident that pursuing a credit card is a wise idea. To know if the time may be right, be sure of the following:
- You're ready to build a credit history. The longer you've had and responsibly used credit cards (as well as other credit products), the better your credit will be. That's because credit scores are derived from the information listed on your credit reports, which include credit card accounts, among other accounts.
- You want to shop online .It's smart to use credit cards for e-commerce because they come with valuable consumer protection. For example, disputing unauthorized charges is usually relatively fast and easy, and if a product you ordered doesn't arrive (or does but is broken, has missing parts or is not as advertised), you may be able to have the charges reversed if the retailer doesn't offer resolution.
- You know how much cash is required to cover your expenses. Prior to getting a credit card, you'll need to have an accurate sense of the amount of money necessary to pay for all your living costs. Otherwise you may turn to your credit card to meet an unexpected budgetary shortfall, then wind up in debt.
- You can resist temptation. Resisting the lure of "extra" funds on a credit line takes maturity and dedication. When you want something unaffordable, that piece of plastic can be seductive, so you'll need the willpower to say no.
- You're prepared to manage the account. As a credit card owner, you have to make sure the account is properly managed. That takes time and energy. By checking your online statement at least once a week, you can stay on top of balances and can pull back when they're getting too high for comfort. It's also a way to catch fraud early.
How Do I Get a Credit Card?
Aside from reviewing your financial circumstances, credit card companies will check your credit reports and scores to determine if you're a desirable cardholder. For example, if you have a student loan in your name and it's in good standing (it's not in default and any payments you've sent have been made on time), it's helping your reports and scores. The same goes with any other credit product you're associated with, such as a car loan your parents may have cosigned for you.
If you have few or no credit accounts, your credit file is considered "thin," and a credit card company can't accurately determine credit risk. In that case, your first credit card will usually be one of the following:
- Secured card. These products act the same as unsecured cards, but you're required to put down a cash deposit with the issuer, which becomes your credit line. The funds are held in a separate account and used as collateral, so if you skip out on the debt you've racked up with a secured card, the issuer will tap into the funds held in deposit. But if you manage your secured card well, your issuer may transition you to a regular unsecured credit card and refund your deposit.
- Retail card . If you have a favorite place to shop (and won't go overboard with the charges), a retail card may be right for you because their credit requirements tend to be minimal. Their interest rates are usually higher than other cards, however, so be sure you pay off the balance every month if you go this route.
- Student credit card. These products are specially developed for people in college who haven't established their credit histories yet.
Getting a Credit Card Before You're 18 Years Old
If you're a minor and want a credit card, you're not totally out of luck—as long as someone, usually a parent, is willing to add you to his or her account as an authorized user. You'll be issued a credit card imprinted with your name and can use it to make purchases, but you won't be responsible for the account's management. In most cases it will show up on your credit reports, so becoming an authorized user can be a fantastic way to get a jump-start on populating your credit file with positive data. As long as the account owner sends payments on time and maintains a low balance, your credit rating will start to take shape.
Just remember that as an authorized user, you're a guest on the account. If you are expected to pay for your charges, honor the agreement, since the account owner has the right to give you the boot any time.
You also have the power to remove yourself from the account. Check your credit reports to make sure the account is in good standing. If you spot high debt and missed payments, your authorized-user status is not helping your credit. You can end the authorized-user arrangement by contacting the card issuer and telling them you want out.
Obviously there is a major difference between whether you can get a credit card and whether you should get one. Be ready, not just by chronological age, but by arming yourself with correct information and the financial responsibility you need to manage the account. If you can handle credit responsibly, you'll create an impressive credit history that will help you reach your financial goals in the future.
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.