Christie Matherne, Credit Card Writer
Yes, teens should have credit cards because having one is the most efficient way to build credit history. Plus, credit history will come in handy as teenagers get older. Knowing how to handle a credit limit and reaching financial independence from an early age is a bonus. A significant number of parents agree, too. Nearly 20% of teenagers ages 13-17 have credit cards, according to a TransUnion survey.
Key things to know before giving a credit card to a teenager:
- Add them as authorized users: The only way someone under 18 years old can get a credit card is by becoming an authorized user on an adult’s account. While there is no legal minimum age requirement for an authorized user, some credit card issuers have their own age requirements.
- How to build credit: Credit card companies do report to credit bureaus about authorized users, which builds credit history.
- Bill payment responsibility: The primary cardholder takes on the responsibility of paying whatever debt ends up on the card, regardless of who is using the account as an authorized user. Parents who are thinking about adding their teen as an authorized user should set some rules for the card, and make sure those rules are enforced. After all, if a minor wreaks financial havoc as an authorized user on your credit account, you’re stuck with the bill.
- Setting ground rules: Some credit card companies make it easy for primary cardholders to monitor spending and create boundaries for authorized users. American Express consumer credit cards allow cardholders to set spending limits as low as $200 for each authorized user. The Barclays mobile app allows primary cardholders to customize spending limits per transaction, with the option to turn certain spending categories on or off.
- Benefits of getting a credit card as a teen: Teenagers who get credit cards before they’re 21 years old, either as an authorized user on someone else’s account or on their own after they turn 18, tend to have better outcomes. They’re more likely to have a higher credit score later on in life, and are less likely to default on financial obligations in the future, according to an University of Wisconsin study. Becoming financially literate is increasingly important in our modern world, and early exposure to the credit system can pay dividends.
When they turn 18, a teenager has the opportunity to apply for their own credit card, granted they have their own independent income. Many 18-year-olds have limited or no credit history, so they may be limited to a student card or a secured card. Some student cards have rewards beneficial to students, like statement credits for good grades. And they generally come with better terms than cards offered to non-students with limited credit history.
Capital One Platinum Credit Card
People also ask
Did we answer your question?