Having a credit card can be fun if you’re young. You don’t really need to ask your parents for money to spend on something. And it’s also a matter of pride, in some ways, to boast that you already hold a credit card. In fact, a lot of younger people actually dream of owning a credit card and becoming free from the hassles of borrowing money from their parents.
Bad News First
Therefore, here’s some bad news for all such youngsters that want to get a credit card.
The Credit Card Accountability Responsibility and Disclosure Act of 2009, also known as the Credit Card Act, passed by Congress in 2009, prohibits anyone below the age of 21 years from having their own credit card.
The law clearly says that no person below the age of 21 years can enter into an agreement or contract for credit cards. By doing so, the Credit Card Act 2009 aims to protect younger persons against falling victim to credit default, which ruins their credit scores.
A poor credit score can damage anyone’s future and setback their life by at least seven years. This is proven by the fact that students with unpaid student debt suffer a lot due to unpaid education loans.
Now, the Good News
At the same time, the Credit Card Act 2009 also allows certain types of persons below the age of 21 years to own a credit card and only in specific situations. These might be interesting if you wish to get a credit card while a teenager or below the age of 21 years.
Anyone above the age of 18 years can apply for a credit card in the USA, provided they meet certain criteria, which I will discuss later.
Additionally, banks operating in the US have also been given the choice of issuing credit cards to anyone above 13 years of age if they qualify under the rules of these banks.
However, getting a credit card when you’re 13 years old or even 18 years old can prove quite hard due to the Credit Card Act-2009. While there’re provisions for issuing a credit card to persons below 21 years of age, these terms and conditions from banks aren’t very easy to comply with for anyone of that age.
At What Age Can You Get a Credit Card?
Surely, now you would be curious to know how old do you have to be to get a credit card and how. There’re three different ways to get a credit card if you’re seriously interested in getting one. However, none of these ways is easy as you or I might wish.
1. Credit Cards for 13-Years Old and Above
You can get a credit card right from your 12th birthday or 13th birthday. However, this type of credit card is known as an ‘Authorized User’ card. In simple words, it means that you don’t actually own a credit card. Instead, your parent has allowed or authorized you to use their credit card.
Generally, most banks allow you to get an ‘authorized user’ card. That’s because it will be linked directly to the credit card and spending limit of your parent- meaning Dad or Mom. Your parents have to set a monthly limit for spending on your card and apply to the bank to issue an add-on or authorized user credit card in your name.
These cards don’t count towards your credit score and credit history. Instead, it matters to your parents because they will be paying the dues every month or billing cycle. When they pay on time, it will help your parents to build a credit score.
Such a system of authorized users or add-on cards is ideal for parents that want to educate their child on financial and money handling issues which aren’t usually taught at schools. It could help you develop wonderful life skills on how to budget and spend every month as though you’re financially independent. It is one of the best monetary gifts you can give to your kids.
Also Read: How To Use a Credit Card?
2. Secured Credit Card
Not all banks issue secured credit cards. However, you could request one from Bank of America and a few others if they have offices in your area. However, a secured credit card is available only if you’re above 18 years of age.
As a matter of fact, a secured credit card is ideal for anyone that wants to build a good credit score in some way. It also teaches you finance and money management skills, such as budgeting and investing or spending with care.
Basically, a secured credit card is somewhat like a prepaid card. You would have to deposit a certain amount of money at a bank on a long-term fixed deposit or any other qualifying savings plan from the bank. If you fail to repay the money spent on the secured credit card, the bank forfeits your deposit legally.
The minimum deposit to qualify for a secured credit card is $300. This means the bank will give you a credit card with a spending limit of $250, or 80 per cent of the deposit amount. The Annual Purchase Rate or APR on such a credit card is usually high and stands around 24 per cent per year.
You might wonder, what’s the use of such a secured credit card if you have to deposit the money in advance at a bank and can enjoy only about 80 per cent of the value? There’re two advantages, actually. The first is that you can build a healthy credit score with a secured credit card if you repay on time.
The second is that you get a credit worth the spending limit for a certain number of days. That means you have to pay for your shopping or spending only after 35 days to 50 days, depending on who issues the credit card.
Another advantage is that a secured credit card could teach you finance and money management skills. As long as you pay on time, you can get interested in your deposit with the bank. And when you cancel the credit card while wiping off all the dues, you can get the whole amount of the deposit back with some interest.
3. Unsecured Credit Cards for 18-Years Old
Banks aren’t usually happy to issue a credit card to you at the age of 18 years. However, some banks issue such credit cards if you’re 18 years or older and have a proper monthly income from a steady source, such as a job.
In such cases, you have to prove that you have an independent and steady income from any job or other source. The bank will also assess your ability to repay your credit card dues on time. They take several other factors into consideration, such as your age and experience at a job and reasons for needing a credit card.
Therefore, if you have a steady income and the ability to repay your credit card dues on time, apply for such a credit card at the age of 18 years. Such credit cards can affect your credit scores. Using it properly could help build a wonderful credit score for the future while reckless spending and inability to repay can harm your career or personal life due to poor credit history.
4. Student Credit Cards
Additionally, students around the age of 18 years can also get a special credit card. Commonly known as the student credit card, it is available to college and university students. This credit card can prove dangerous, according to various reports.
On average, a student in the US leaves college with a debt of about $30,000. Unless repaid on time, this debt can become a major hurdle and can delay a lot of decisions in life, such as marriage and home ownership, among others.
In some cases, students as young as 16 years can also get a credit card worth a smaller spending limit independently. However, this credit card is given on the guarantee of repayment by the parent. That means if you fail to pay, the parent would have to cough up the money.
A student credit card can affect your credit scores. And in every case, a student owning an independent credit card has seen their credit scores drop heavily.
Above 21-Years of Age
Anyone that has a stable income and a proper credit score or even hasn’t started getting a credit score can easily get an unsecured or regular credit card from a bank or issuer of their choice. The Credit Card Act-2009 provides for banks to issue such credit cards to persons above 21 years of age.
Therefore, this is the best age to own a credit card. The issuer usually gives you the first credit card with a smaller spending limit. And if you repay the dues on time and regularly, the issuer increases your spending limit at least once a year.
A majority of credit cards issued in the USA are to persons above 21 years of age. While issuing such a credit card, the bank or financial organization considers your age, education, job, monthly income and several other factors such as location and ability to repay.
As you can see from these descriptions, the minimum age to get a credit card is 13 years onwards. Various banks have their own rules regarding the issue of credit cards to persons below the age of 21 years.
If your parents give you an authorized user or add-on card at the age of 13 years, use it prudently and learn all the money management lessons. And if you get a credit card at the age of 18 years, prove that you’re effectively able to manage your own money.