How To Introduce Young Adults To Credit Cards

Young adults ages 18 and over have three options when it comes to having their own credit card. First, they can be added as authorized users on someone’s existing account, such as a parent. In addition, they can open their own account in conjunction with a co-signer. Finally, they can open their own account as the primary cardholder

Being an authorized user

An authorized user has his or her own card, and can use it to make charges to the primary cardholder’s account. Also, an authorized user cannot make changes to the account or redeem rewards, and only the primary account holder is responsible for repayment. This arrangement works well when a student is unable to qualify for his or her primary account, and it allows the parent or another adult to monitor the student’s spending.

Opening up an account with a co-signer

The CARD Act of 2009 requires that credit card applicants ages 18-21 show proof of their ability to repay using a full-time income.1 So full-time students may need a co-signer, such as a parent, if they wish to open an account of their own. In this case, the student becomes the primary account holder, however the co-signer will share responsibility for repayment in the event of default. While some young adults will ask their friends over 21 to co-sign their credit card application, this is never a good idea. When friends co-sign loan applications, they are taking responsibility for repayment of a loan, without having control over how much is borrowed. Furthermore, the payment history for the account will affect both applicant’s credit scores.

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Opening up an account on their own

Students and other young adults who can show an income can open up their own account as a primary cardholder. These applicants will have very little credit history and should focus on student credit cards that are offered for this purpose.

Some tips for students and other young adults

The safest way to learn how to use a credit card responsibly is to start as an authorized cardholder under the account of a parent or another older adult. The primary account holder can then closely monitor the student’s spending, and the student can reimburse the account holder for the charges they make.

Once young adults become the primary cardholder of their own accounts, their first priority should be to use their credit cards responsibly. The most important consideration is to make each month’s payment on time. And remember, the least expensive way to use a credit card is to avoid interest charges by paying each month’s statement balance in full.

By developing responsible credit card habits early, young adults can realize the savings throughout their entire life.



Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 

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