“What’s the best credit card for my teen?”
Getting your first credit card is a major milestone on the path to adulthood. If your teen is 18 and will soon be headed off to college, you may be considering whether they should get a credit card. But should they apply for a new credit card, get a secured card, or would a student credit card be best?
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Cover the Basics Before They Apply
You taught them how to walk, ride a bike and drive a car, but have you taught them how to manage credit? The first step in finding the best credit card for your teen is to have a conversation. Help set your teen up for financial success by talking to them about the importance of managing credit. Discuss the basics of using a credit card, from credit scores, to how interest rates work and common credit card mistakes to avoid before they apply.
Applying for a First Credit Card
It’s important to note, the CARD Act of 2009 made it more difficult for students to acquire a credit card on their own if they are under 21. People under 21 cannot apply for a credit card without a co-applicant or guarantor over the age 21, or proof of income that they have the independent means to repay the debt they could incur. The good news for parents is you and your teen still have several credit card options to consider.
Student Credit Cards
There are a variety of student credit cards on the market that require little to no credit history. With so many choices, it’s important to consider your teen’s lifestyle and spending habits. If your child applies for a student credit card and does not have an independent ability to pay, you (or another creditworthy individual) will need to co-sign or jointly apply if he or she is under 21. The benefit to this is that it may lower the card’s interest rate and give your teen a better chance of approval.
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Adding an Authorized User
Another option is to add your teen to an existing credit card as an authorized user. Minimum age requirements vary between issuers. Ask your issuer if it reports accounts to the credit bureau for authorized users. If it does, and if you maintain a good payment history with that issuer, this may help your teen build a credit history.
Secured Credit Card
With a secured credit card, the available credit on the card is restricted to a security deposit. Typically, a secured credit card requires a $200-$500 deposit to activate it and this is placed in a savings account.
3 Tips for Comparing Credit Card Offers
Here’s what to look for when comparing offers for your teen’s first credit card:
1. Search for a low interest credit card.
Look for a credit card offering a low APR or 0% intro APR for an introductory period. After the introductory period, the rate will increase. Finding a rewards card with a 0% APR promo rate and cash rewards can help offset the cost of tuition and books.
2. Understand the credit card fees.
Make sure to read the fine print so you understand the fees. Look for a card offering no annual fee and talk to your teen about how to avoid common credit card fees like card terms and late payment fees.
3. Read reviews.
Take time to compare offers and read reviews before applying. Researching what real cardmembers say on social media and review websites is a one way to see if the card will be right for your teen.
With a little research and some planning, you’ll be able to find the right card for your teen, helping them establish their credit history, and getting them one step closer to becoming financially independent.