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If you’re under 21, how easy is it to open a credit card? Thanks to legislation in the past ten years, not as easy as it used to be – but certainly not impossible. Credit cards for teenagers are out there. They just won’t hold the same terms and conditions as credit cards for those with established credit.

How does a credit card work?

A credit card is a type of revolving debt. This means that the amount you owe to a lender can continually change month to month. The actual card ties back to an account with a set credit limit. The credit limit is the maximum amount of money the lender will allow you to use. Every card comes with an interest rate. This percentage is added to the unpaid debt at the end of each monthly payment cycle. This is why it’s so important to pay off your credit card bill every month. The interest can quickly add up and make it difficult to pay your bills on time.

Here’s an example.

Andy is approved for a credit card with a $1,000 credit limit and a 12% interest rate. He can spend up to $1,000 before he reaches the card’s limit – although spending the entirety of your credit limit is not recommended.

Andy spends $300 this month, and his monthly bill is $300. The lender gives him the option to make a minimum monthly payment of $25. If Andy only pays the minimum payment, the rest of the unpaid debt will be subject to the 12% interest rate.

Andy decides to only pay the $25 minimum monthly payment. That means that $275 is still unpaid, and with the 12% interest, the bill for next month is already up to $308. The next bill doesn’t include any amount Andy decides to spend beyond the current balance of $308.

This example shows how credit cards can be dangerous. If you only pay minimum payments, or skip paying your bill just one month, they can rack up debt and hurt your credit score quickly. The golden rule is to not spend more than you can pay off at the end of the month. If you pay your bill in full and on-time every month, then you can stay debt-free and improve your credit score.

When is the right age to open a credit card?

There are many who feel teenagers opening credit cards is irresponsible. While it’s true that a credit card comes with great responsibility, only you and your parent or guardian know when it’s the right time to open a card. Keep in mind that you must be at least 18 years old to be the primary account holder of a credit card.

We recommend you wait to apply for a credit card until you know exactly how a credit card operates, you have routine paychecks, and you have a history of paying your bills on time. The age that this happens is different for everyone. If you’re not ready, continue using a debit card or cash until you are. There’s no problem with waiting a few years until you’re confident that you won’t misuse a credit card.

The Credit CARD Act of 2009 made sure that no credit card could be issued to an individual under the age of 21 unless one of the following qualifications were met.

• The account has a cosigner over the age of 21
• The individual can provide proof of independent income

These protections ensure that young adults are not getting into debt before they’ve even received a credit score. Here are our suggested methods for teenagers looking to open their first credit card.

1. Become an authorized user. [For 18 & Under]

Even if you’re under 18, your parent or guardian has the option to add you as an authorized user on their already open credit card. You’ll receive a card of your own that attaches to the same account. This can be a great option for beginners with no credit.

Keep in mind that your spending will affect the primary user of the account. They will be responsible for any debt you rack up, and you could either hurt or help their credit score. On the positive side, being an authorized user will start building up your credit history, making it easier to be approved for your own credit card once you’re 18.

2. Cosign with someone you trust. [For 18 & Over]

A financial institution often requests that those with no credit history, or those who are under 21, have someone they trust cosign on the account. The cosigner will need to be over the age of 21 and have an established credit history. The cosigner is vouching for your ability to repay the bank. This also means that if you accidently overspend, the financial institution can legally hold the cosigner responsible for your debt. If this happens, the cosigner will see their own credit score affected by your actions. Make sure you feel confident you can pay your bills on time before asking someone to cosign on a credit card account.

3. Open a secured credit card. [For 18 & Over]

If you’re able to provide proof of income, but you don’t have enough credit history to qualify for a standard credit card – this type of card could work for you. Most cards advertised are unsecured credit cards. The provider is gives you access to funds and trusts you to pay them back based on your positive credit history. With a secured credit card, an up-front deposit is required to be approved. The amount of the deposit will determine the amount of credit you have access to. If you don’t pay them back, they have your deposit money to cover your unpaid bills. Make sure you’re able to save up enough funds to pay the opening deposit, as well as pay your bill on time each month.

Visit your local financial institution or credit union to ask for a secured credit card. Local credit unions often have more forgiving policies for young adults and teenagers. Even if you’re only able to start with a $300 credit line, using the card and paying your bill every month will build up your credit quickly. Once the credit card issuer sees that you’re trustworthy, you can ask for your credit card to be changed to an unsecured account.

Avoid these credit cards.

There are still predatory lenders out there who are looking to take advantage of first timers and beginners with no credit. Avoid any credit card that seems too good to be true, comes with annual fees, and is marketed towards those with bad credit. These cards often come with high fees and interest rates, and can hurt your credit more than help it.

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