Entering the world of adulthood is both exciting and terrifying. So many decisions to be made, and one of the key financial choices you might face is obtaining a credit card. But what if you're under 18? In this Flik Eco post, we'll explore credit cards for people under 18, the various options available, and how to navigate this essential aspect of personal finance in your teenage years.
Credit Cards For People Under 18 Table of Contents
Why Would Someone Under 18 Need a Credit Card?
Credit Card Options for People Under 18
Why Would Someone Under 18 Need a Credit Card?
There are several reasons why a teenager may want a credit card:
- Emergency expenses - such as medical bills or car repairs
- Making online purchases securely
- Creating a credit history - building a positive credit score early on can make future financial decisions easier
- Learning budgeting and financial responsibility
Credit Card Options for People Under 18
Considering the legal age to apply for a credit card is 18, there are limited options for teenagers. However, here are some alternatives:
Debit Cards
Debit cards are an excellent option because they don't require a separate credit application. Linked to checking accounts, debit cards have no interest fees and are accepted in many places where credit cards work. It's an easy way for teens to learn financial responsibility without the risk of accumulating debt.
Prepaid Cards
Prepaid cards work similarly to debit cards, but without needing a checking account. You "load" the card with a certain amount, and it can be used until the balance depletes. Although they're an excellent way to budget and control spending, prepaid cards often come with fees and may not help build a credit history.
Authorized User on Parent's Account
With this option, the parent adds the teenager as an authorized user on their credit card. They'll provide the teen with a card in their name, and they'll share the available credit. This allows the teen to build their credit score, but the primary cardholder is responsible for the debt. Parents should be cautious with this method and set clear spending boundaries with their child.
Secured Credit Cards
Secured credit cards require an upfront deposit (usually equal to the credit line) as collateral. They're designed to help those with poor credit or no credit history establish and improve their credit score. Some banks and credit unions offer secured credit cards to young adults with restrictions. It's essential to research the specific requirements and terms for those under 18.
Credit Cards For People Under 18 Example
Kim is a 16-year-old high school student who wants to learn more about managing her finances. She speaks with her parents and opens a checking account with a linked debit card. Kim works part-time and deposits her income into her account, which she uses to pay for gas, school supplies, and occasional outings with friends.
When she turns 17, Kim's parents decide to add her as an authorized user on their credit card. They set a monthly spending limit on the card, teaching her about managing credit and paying off monthly bills to avoid interest charges. By the time Kim is 18 and ready to apply for a credit card of her own, she has a foundation of financial responsibility and a budding credit history.
Credit Cards For People Under 18 Frequently Asked Questions
Can people under 18 get credit cards?
While individuals under 18 cannot apply for a standalone credit card due to legal restrictions, there are options like becoming an authorized user on a parent's or guardian's account, which allows them to have a card in their name.
What is an authorized user?
An authorized user is someone added to a credit card account by the primary cardholder. They get their card linked to that account but are not legally responsible for paying off the balance.
Does being an authorized user build credit?
Yes, being an authorized user can help build credit if the primary cardholder manages the account responsibly. Activities on the account, like on-time payments, can positively influence the authorized user's credit history.
Are there credit cards specifically for teens?
There are cards designed with teens in mind. These often come with parental controls, which can set spending limits, monitor transactions, and receive notifications about the card's use.
What's the difference between a credit card and a prepaid card?
A credit card allows you to borrow money up to a set limit, which you'll need to repay, possibly with interest. A prepaid card, on the other hand, requires you to load money onto it first, and you can only spend what's loaded.
Are prepaid cards a good option for those under 18?
Prepaid cards can be an excellent way for teens to learn money management without the risk of accruing debt. However, they typically don't help in building credit.
Can a person under 18 get a student credit card?
Student credit cards are generally for college students, and applicants typically need to be at least 18. They might also need proof of income or a co-signer to qualify.
What's a co-signer?
A co-signer is someone who agrees to be responsible for the debt if the primary cardholder doesn't pay. They need to have a good credit history, as their creditworthiness helps secure the credit for the primary applicant.
Can secured credit cards be an option?
Secured credit cards require a deposit that acts as the credit limit. While they're primarily for those looking to build or rebuild credit, an individual under 18 would still need a co-signer to open such an account.
How do credit cards impact college applications or job opportunities?
While credit cards themselves don't directly influence college admissions or job applications, a poor credit history can affect certain opportunities. Some employers check credit reports as part of the hiring process.
What is a good starting credit limit for someone under 18?
A lower limit, perhaps between $200 to $500, is advisable for beginners. It's enough to make small purchases and learn responsible card management without the risk of accumulating a large amount of debt.
How can someone under 18 learn responsible credit card habits?
Education is key. Parents or guardians should guide them on the importance of on-time payments, the dangers of high credit utilization, and the significance of reading statements and understanding interest rates.
Is there an age minimum to be an authorized user?
Policies vary by card issuer. Some have no age limit, while others might require the authorized user to be at least 13 or 15.
Do parents receive notifications of an authorized user's spending?
Many card issuers offer features that allow primary cardholders to receive alerts or notifications about the spending activities of authorized users.
What happens if an authorized user overspends?
The primary cardholder is responsible for any charges the authorized user makes. It's crucial to set clear boundaries and expectations about card use.
Can an individual under 18 have more than one credit card?
While possible, especially if they're an authorized user on multiple accounts, it's important not to spread oneself too thin and risk mismanagement.
Are there apps or tools to help manage a first credit card?
Numerous apps can help users track spending, make payments, and monitor credit scores. These tools can be beneficial for first-time card users.
Can an authorized user be removed from an account?
Yes, the primary cardholder can remove an authorized user at any time. Similarly, an authorized user can request to be removed.
What's the best way to monitor credit for someone under 18?
Regularly checking credit reports ensures accuracy and helps detect any fraudulent activity. Several services provide free annual credit reports.
How can someone under 18 handle credit card disputes or fraud?
First, it's essential to report any suspicious activity to the card issuer immediately. Then, ensure that the primary cardholder checks their statement and follows up on any disputes.
With the right guidance and tools, young individuals can navigate the world of credit successfully. Starting early, under responsible supervision, sets the stage for a strong financial future.
There's no denying the importance of learning about personal finance early on. We hope this guide on credit cards for people under 18 has helped you consider your options and make informed decisions. Feel free to explore more guides on Flik Eco to continue your financial journey. Don't forget to share this article with others who might benefit from this information. Remember, financial empowerment starts with knowledge!
