Choosing a Credit Card for Your Teen

As your teenager approaches adulthood, you may be thinking about their first credit card. After all, a credit card can be an excellent tool for teaching financial responsibility and building a credit history. But how do you choose the best credit card for your teen? We can help.

Credit cards for teens eighteen and older

Individuals eighteen and older are legally allowed to open a credit card in their name. But based on the CARD Act of 2009, borrowers between eighteen and twenty must show they have enough independent income (like from a job or regular allowance) to repay their credit card debt. With the proper income and credit history, some young adults may qualify for a standard credit card, but most don’t meet the requirements. Luckily, there are good options for young adults with little or no credit history.

Student credit cards

A student credit card is designed specifically for college students who have never established credit. That means, in most cases, a credit card issuer won’t require a credit score to apply. Instead, credit card companies consider a student’s age and income when reviewing applications, and income requirements for student credit cards are generally lower than those for regular credit cards. 

And because of their typically lower credit limits, student credit cards can be ideal for helping teens build credit responsibly and with less risk. These kinds of cards may also offer reward perks, such as cash back on every eligible purchase. For example, the Discover it® Student Cash Back Card lets you earn 5% cash back on everyday purchases at different places each quarter, up to the quarterly maximum when you activate.

Secured credit cards

If your teen is not a college student and has no credit history, their best option may be a secured credit card. A secured card provides a line of credit (approved by the credit card issuer) that requires a deposit of equal value. The often lower spending limit can make it easier for first-time borrowers to manage payments, and potential cash back rewards can help with everyday expenses.

Once your teen demonstrates responsible use by keeping balances low and making on-time payments, they may be able to transition to an unsecured account. With a Discover it® Secured credit card, you can get your deposit back when you upgrade to an unsecured card after six consecutive on-time payments and six months of good status on all your credit accounts.¹ And there’s no credit score required to apply.²

Can a minor get a credit card?

If your teen is under eighteen, they can’t apply for a credit card in their name. However, dependent on age, your minor can still get a credit card if you add them as an authorized user to your account. For instance, Discover allows a primary cardmember to add an authorized user fifteen and older to their credit card account. And once your teen turns eighteen, their credit history may help them qualify for better terms when applying for their own lines of credit.

Remember that you’re legally responsible for any charges your teen puts on your credit card, so setting expectations and agreeing to sensible spending are key to success. If your teen runs up a high balance you can’t pay down, both your credit scores can suffer. Also, if youhave bad credit, adding your teen to your account may hurt theirs, as your less-than-stellar credit activity could get added to their credit report. 

What to know when choosing credit cards for teens

You and your teen can get involved with choosing their first credit card. To make it easier, you may want to understand your teen’s financial literacy and introduce them to the basics of credit, like what an interest rate is, how to use a credit limit, the importance of making payments on time, and what it means to build good credit. Once you start researching cards, make a list of features important to you both, and consider the following when deciding on the best credit card:

• Credit card fees: Most credit cards for teens come with no annual fee, but if your teen plans to travel, you’ll need to know if an issuer charges a foreign transaction fee for purchases made abroad. 

• Credit card rewards: Many credit cards offer cash back or other rewards for each eligible purchase. 

• Credit reporting policies: To start building credit, your teen’s borrowing and payment activity must get reported to a credit bureau. Credit card companies have different policies when it comes to reporting account activity. Consider a credit card company (like Discover) that reports monthly activity to one or all of the three major credit bureaus. 

• Additional offerings: Tools such as mobile apps can help your teen manage their account with features like automatic payments and text alerts that notify them when monthly bills are due or payments post. Some apps even help with budgeting. 

There are a lot of factors to consider when choosing a credit card for your teen. It’s essential to explore your options and communicate with your teenager about responsible credit use. With the right card and a little guidance, your teen can use a credit card to strengthen their financial future.