Did you know that even teenagers can benefit from using credit cards? By getting a credit card as soon as they turn 18, young adults can start building their credit history and learn essential money management skills. This Flik Eco guide will break down everything you need to know about credit cards for under 18-year-olds, and how they can be used responsibly.
Credit Cards For Under 18 Year Olds Table of Contents
Can a person under 18 have a credit card?
Can a person under 18 have a credit card?
Technically, individuals under 18 cannot apply for or own a credit card independently. However, there are options available to get access to a credit card, like authorized user status or joint accounts. Understanding these options will give young adults the opportunity to build credit early in life, helping them set a strong financial foundation.
1. Authorized Users
Parents or legal guardians can add their child as an authorized user on one of their credit card accounts. By doing so, the young adult will get a card with their name on it but won't be legally responsible for the account's charges. This arrangement allows the young adult to build credit history while the parent stays in control.
2. Joint Accounts
Another option is for the young adult to open a joint account with a parent or legal guardian. Both parties are equally responsible for paying off the balance and managing the account. This method helps the under 18-year-old build a credit history while also holding them more accountable for their spending.
How can teenagers use credit cards responsibly?
Building positive credit history requires responsible card usage and management. Consider these best practices to ensure success when using a credit card as an under 18-year-old:
- Keep a low credit utilization rate – try not to spend more than 30% of your credit limit.
- Pay off the balance in full each month to avoid interest charges and maintain a good payment history.
- Review credit card statements regularly to track spending and spot any discrepancies.
- Set a budget to avoid overspending and ensure that all the charges are manageable.
Benefits of having a credit card at a young age
Starting to use a credit card at a young age comes with several benefits, including:
1. Building Credit History
An early start will establish a robust credit history, which can impact future loan interest rates, insurance premiums, and even employment opportunities.
2. Learning Financial Responsibility
Having a credit card as a teenager presents an excellent opportunity to learn about budgeting, spending, and managing debt. These crucial skills will help the individual to make informed financial decisions later in life.
3. Rewards and Perks
If used responsibly, the young adult can enjoy perks like cashback, travel rewards, and discounts associated with the parent's credit card.
Credit Cards For Under 18 Year Olds Example:
Let's assume Sarah is 16 years old, and her mother has added her as an authorized user on her credit card account. Sarah starts using the card to pay for small purchases such as school supplies and her mobile phone bill. Each month, she tracks her spending, ensures she stays within the 30% credit utilization rate, and her mom pays off the balance in full. By the time Sarah turns 18, she's built a solid credit history and has gained valuable financial skills for her future. When she applies for her credit card, she has a better chance of being approved for more favorable terms and interest rates.
Now that you know how credit cards can benefit teenagers and how to use them responsibly, it's time to help the young adults in your life start building a strong financial future. With the right guidance and management, a credit card can be an educational tool that sets them up for success. If you found this Flik Eco guide helpful, be sure to share it with others and explore our other personal finance articles for advice on banking, savings, mortgages, and more.
