Can a Kid Have a Credit Card? Here’s How

Credit cards offer convenience and a pathway to building credit history. Many parents wonder about a minor obtaining a credit card. Understanding the regulations and available options is important for navigating this aspect of personal finance.

Understanding Age and Income Requirements

In the United States, the legal age for most credit card agreements is 18. However, reaching this age does not automatically qualify an individual for a credit card. Federal law, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, imposes additional requirements for applicants under 21.

This legislation mandates that individuals aged 18 to 20 must demonstrate independent income sufficient to make minimum payments. This income can stem from various sources, such as a job, self-employment, or consistent allowances. Without verifiable income, an individual under 21 cannot obtain a credit card in their own name. A minor, defined as someone under 18, cannot legally apply for or be approved for a credit card independently.

Becoming an Authorized User

While a minor cannot independently apply for a credit card, becoming an authorized user on an adult’s account offers a practical way for them to use one. An authorized user is someone given permission to use another person’s credit card account, enabling purchases without being legally responsible for paying the balance. The primary cardholder remains solely liable for all charges made on the account.

Adding an authorized user involves the primary cardholder providing the credit card issuer with the authorized user’s name, date of birth, and Social Security Number. This can be done online, through a mobile app, or by contacting the issuer directly. Some issuers have minimum age requirements for authorized users, with some allowing individuals as young as 13.

Becoming an authorized user can positively influence an individual’s credit history. When the primary cardholder manages the account responsibly, making on-time payments and maintaining low credit utilization, this positive activity may be reported to credit bureaus and appear on the authorized user’s credit report. If the primary cardholder exhibits poor financial habits, such as late payments or high balances, it could negatively impact both their credit score and that of the authorized user. Primary cardholders should consider setting spending limits or closely monitoring usage to guide responsible spending habits.

Credit Card Options for Young Adults

Upon reaching 18, individuals gain the legal capacity to enter into credit card contracts, though the income requirement under the CARD Act of 2009 remains until age 21. For young adults seeking to establish their own credit history, secured credit cards and student credit cards are common entry points. These options are helpful for those with limited or no prior credit history.

Secured Credit Cards

Secured credit cards require a cash deposit, which becomes the credit limit for the card. This deposit acts as collateral, reducing risk for the card issuer and making these cards accessible to individuals with a developing credit profile. Responsible use, including on-time payments, is reported to credit bureaus, helping the cardholder build or rebuild credit. Many secured cards offer a path to “graduate” to an unsecured card after responsible use.

Student Credit Cards

Student credit cards are designed for college students, featuring lower credit limits and tailored rewards. Eligibility requires proof of enrollment in an educational institution, along with income information. These cards function like regular credit cards, with activity reported to major credit bureaus. Student cards provide an opportunity for young adults to build a credit history while managing smaller credit lines, which can be beneficial for learning financial responsibility.

Key Considerations for Credit Card Use

Responsible credit card management is important for anyone. Understanding the terms of a credit card, including interest rates and fees, is a foundational step. Annual percentage rates (APRs) dictate the interest charged on unpaid balances, and various fees, such as late payment fees or annual fees, can impact the overall cost.

Making on-time payments is a primary aspect of responsible use. Payment history significantly influences credit scores, and late payments can remain on credit reports for up to seven years, potentially leading to fees and higher interest rates. Paying the full balance each month avoids interest charges and prevents debt accumulation. If paying in full is not feasible, paying more than the minimum due reduces the total interest paid over time.

Managing credit utilization, which is the amount of credit used compared to the total available credit, is another important factor. Keeping balances low, below 30% of the credit limit, is beneficial for credit scores. Regularly checking credit card statements helps monitor spending, identify errors, and detect potential fraudulent activity. These practices contribute to building a positive credit history, important for future financial endeavors like obtaining loans or mortgages.