While 18 is considered the age of adulthood, credit card issuers generally set a minimum age of 21 for cardholders. But some parents like the idea of letting a teen carry a credit card for necessary expenses or to use in case of an emergency.
If you want to give your teen practice using credit responsibly, while laying the groundwork for a good credit score, here’s what you need to know.
Ways to get a card for a teen
One method of obtaining a first credit card is to make your son or daughter an authorized user on your own account. This allows your child to have his or her own card, but you, the primary cardholder, are responsible for making payments when your child makes purchases on the card. Some issuers allow the primary cardholder to set a spending limit for authorized users, so be sure to check if this is what you want.
It’s important to evaluate your teen’s level of maturity and set clear expectations — buying a bus pass, yes; getting a tattoo, no — for how your child may use the card. Establish in advance whether your child will contribute to the monthly payments, and how much you are willing to pay yourself.
Another way to go about it is to co-sign your teen’s credit card application, which means you’re promising to be responsible for the bills — including any interest or penalties — if your child fails to pay them. Co-signing will be necessary for approval unless the teen is able to provide proof of his or her own income stream.
Choosing a card and learning to use it
If you co-sign for a card, you’ll want to make sure that your new young cardholder understands that even no-fee cards can quickly become expensive: Interest costs, late-payment fees, penalties and collection expenses can add up if the card isn’t used responsibly. Plus, late or missed payments can seriously damage both of your credit scores.
With a credit card in hand, your teen will start accumulating a credit file, so teach the importance of paying bills on time each month and keeping charges below 30% of the spending limit.
When your teen reaches age 18, start reviewing his or her credit report each year just as you do your own, with the three nationwide credit bureaus, Equifax, Experian and TransUnion. A young person’s Social Security number and personal information can be stolen by identity thieves and used to apply for government benefits, tax refunds and credit card accounts, just like yours can.
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