How Do I Choose a Credit Card for My Teenager?
Finding a credit card for your teenager or young adult means determining their creditworthiness, trusting them to spend responsibly and making sure both parties (parents and child) are on the same page about who’s paying the bills and what could happen — and who’s responsible — if things don’t go as planned. In short—it can be complicated. But, since a credit card is an excellent way for teenagers to start building a good credit history, it’s worth exploring. Here’s what to know about choosing your teen’s first credit card:
1. Credit card options for teens who are at least 18
There are some good first credit card options for young adults. Minors (under 18 years old) cannot apply for a credit card account in their own name, but it’s important to realize that the Credit Card Accountability Responsibility and Disclosure Act of 2009 requires that people 18-21 years old show that they are independently able to repay the credit card balance — i.e., have an income. If your teen has a job, that’s great. That may make applying for their own card easier.
Student credit cards
There are some good deals out there for students, like the Discover it® Student Card. Most card issuers will require proof that your teenager is a college student to open a student credit card account.
Secured credit cards
If your teen is not a college student and has no credit history, they may only be eligible for a secured card, which provides a line of credit equal to the required deposit. Once your teen demonstrates responsible use of credit, they may be considered to be transitioned to an unsecured account. After 7 months, Discover begins automatic monthly account reviews to see if you qualify to upgrade to an ‘unsecured’ card and get your deposit back.1
2. How to get a credit card for a minor
If you’re under 18, you’re not eligible for your own credit card account, but a minor under 18 can still get a credit card if an adult is willing to add the minor as an authorized user on the adult’s account. If you want your young teen to have the use of a credit card, you can add them as an authorized user on your own account. Some cards will allow teenagers who are at least 15 to be added as an authorized user to an adult’s credit card.
Advantages of getting a credit card when you’re under 18
A minor can start building a credit history as an authorized user, so being an authorized user on your card can increase your teen’s credit card options when they’re old enough for their own account.2 Once your teen turns 18, their credit history will help them qualify for their own credit card.
Disadvantages of adding your minor teen to your account
If your credit history isn’t good, adding your young teen to your account may not help them because your poor credit activity will be reported on their credit report. You’ll also be responsible for any charges your teen puts on your credit card, so be sure you trust them to spend responsibly.
3. Choosing the right credit card for your teen
Once your teen has a short list of credit cards they’re interested in, review them together. It’s important to make sure you both understand the terms (features, rewards and penalties) and eligibility requirements to help ensure that the card they apply for is the best fit for them. Then, you get to have a nice chat about the importance of making their credit card payments in full, on time, every billing statement.
Check if the issuer offers benefits like Discover’s mobile app — DirectPay allows you to set up and manage automatic bill payments, and your teen can set up text alerts to remind them when the bill is due and confirm that their automatic payment posted. Since 63 percent of people ages 15-24 prefer to access their bank on mobile apps, if your child doesn’t manage money on their phone already, they likely will soon.
4. What if your teen’s credit card application is rejected?
If your teen’s application is rejected, it’s not the end of the world. Read the adverse action letter, which is the card issuer’s detailed explanation of its rejection, to see what you and your teen can work on. Get your teen familiar with monitoring their credit report and make sure their history is accurate.
You can also look into a secured credit card, which is backed by a cash deposit you make when you open the account. This deposit then functions as the credit limit. These cards are usually easier for people with lower credit scores to qualify for, and the limitation of the amount of the deposit can be a help with budgeting. Keep an eye out for annual fees and look for a card that allows the user to transition to an unsecured card after they’ve established that they can use it responsibly (i.e., paying the bills in full, on time, every cycle). With a refundable deposit and cash back rewards, a secured card can be a good option for your teen if they don’t yet qualify for an unsecured card.
And, of course, have them do some research, then review it together to make sure the card they apply for is the best one for them.
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