How Old Do You Have to Be for a Credit Card?

A credit card serves as a financial tool that enables individuals to borrow money for purchases, differing from a debit card which directly draws funds from a bank account. It offers flexibility, allowing purchases to be paid over time, and understanding its rules and responsibilities is important for financial management.

Minimum Age for Credit Cards

Federal law requires individuals to be at least 21 years old to independently open a credit card account in the United States. This age requirement was primarily set by the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. The CARD Act was enacted to protect consumers from potentially unfair practices in the credit card industry, including those targeting younger individuals. Prior to this act, it was often easier for young adults, including college students, to acquire credit cards. The law ensures that applicants under 21 demonstrate a clear ability to repay their debts before being granted independent access to credit.

Options for Under-21 Applicants

Despite the general age restriction, individuals aged 18 to 20 still have pathways to obtain a credit card. One method involves securing a co-signer for the application. A co-signer, who must be at least 21 years old, agrees to share legal responsibility for the debt incurred on the account. While this option exists under the CARD Act, many major credit card issuers no longer offer co-signed credit cards.

Another route for applicants under 21 is to demonstrate sufficient independent income to make payments. This independent income can include earnings from a job, such as salary, wages, tips, commissions, or even regular allowances. Income from scholarships or grants can also be considered, but generally, borrowed money like student loans is not counted unless it exceeds the amount disbursed for educational expenses.

Alternatively, a younger individual can become an authorized user on another person’s credit card account. An authorized user receives a card linked to the primary account but is not legally responsible for the debt. This arrangement allows the authorized user to gain experience with credit and, depending on the card issuer’s reporting practices, may help build their own credit history. However, the primary cardholder retains full financial responsibility for all charges made on the account.

Understanding Credit Card Terms

The Annual Percentage Rate (APR) represents the yearly interest rate applied to outstanding balances. This rate determines the cost of borrowing if the balance is not paid in full each billing cycle. Different types of transactions, such as purchases or cash advances, may have varying APRs.

The credit limit defines the maximum amount of money a cardholder can borrow on the card. Exceeding this limit can result in additional fees. Credit cards may also include various fees, such as an annual fee charged yearly for card usage, or late payment fees assessed when a payment is not made by the due date. The CARD Act limits certain initial fees, such as annual fees, to no more than 25% of the card’s initial credit limit in the first year.

The minimum payment is the lowest amount required to be paid by the due date each month to keep the account in good standing. Paying only the minimum amount can lead to significant interest charges over time, as the remaining balance continues to accrue interest. Credit card statements also specify a payment due date, which must be consistent each month. A grace period, typically at least 21 days from the statement closing date, allows cardholders to avoid interest charges on new purchases if the full balance is paid by the due date.