What Credit Card Should I Get at 18?

Acquiring a credit card marks a significant step towards establishing financial independence. For individuals turning 18, this opportunity allows for the early development of a credit history, which can influence future financial endeavors like securing loans for a car or home. This article provides guidance on obtaining your first credit card.

Eligibility and Requirements

Federal law mandates specific criteria for individuals under 21 seeking a credit card. Applicants must demonstrate an independent means of repaying debt or secure a co-signer. However, many major credit card issuers no longer allow co-signers, making independent income a primary requirement for those under 21.

Independent income for an 18-year-old can encompass various sources. This includes earnings from a part-time or full-time job, self-employment income, regular allowances received from family members, or residual funds from scholarships and grants after tuition and college expenses are paid. The income reported must be sufficient to cover the minimum monthly payments on the account. Proof of income might be requested through documentation such as pay stubs, bank statements showing consistent deposits, or tax returns.

Types of Credit Cards for Beginners

Several credit card options cater to individuals with limited or no credit history. Each type offers distinct features designed to help build a positive financial record.

Secured credit cards are a common starting point, requiring a cash deposit that often becomes the credit limit for the card. This deposit acts as collateral, reducing the risk for the issuer and making approval more accessible. Secured cards function much like traditional credit cards for purchases, and responsible use, such as on-time payments, is reported to credit bureaus, helping to build credit history. Many secured cards offer the possibility to transition to an unsecured card and have the deposit returned after a period of responsible use.

Student credit cards are specifically designed for college students, recognizing their limited credit history. These cards often have more lenient eligibility requirements compared to standard unsecured cards. They may offer student-specific benefits, such as rewards for good academic performance or cash back on everyday purchases. While student cards can be easier to obtain, they typically come with lower credit limits and sometimes higher interest rates.

Becoming an authorized user on someone else’s credit card account can also contribute to building credit. An authorized user receives a card linked to the primary cardholder’s account and can make purchases. The primary cardholder remains responsible for all payments, but the authorized user’s credit report may reflect the account’s payment history, provided the issuer reports this activity to credit bureaus. This method allows for credit building without direct responsibility for payments, though it relies on the primary user’s responsible financial habits.

Selecting Your First Credit Card

Choosing your initial credit card involves evaluating several financial aspects to ensure it aligns with your needs and promotes responsible credit management. A careful review of terms and conditions is important before committing to a card.

The Annual Percentage Rate (APR) represents the interest charged on balances carried over from month to month. For first-time cardholders, APRs can be higher, with average rates for accounts assessed interest around 22-25%. Paying your balance in full each month before the due date means you generally avoid interest charges, making the APR less relevant. However, selecting a card with a lower APR can minimize costs if you anticipate carrying a balance.

Annual fees are charges levied by the card issuer for the privilege of holding the card. While many beginner cards, especially student cards, come with no annual fee, some secured or rewards cards may charge between $50 and $100 or more annually. Assess whether the card’s benefits, such as rewards or credit-building potential, outweigh any associated annual cost. Some cards may waive the first year’s annual fee as an incentive.

The credit limit is the maximum amount you can charge on the card. For a first credit card, initial limits are often modest, ranging from a few hundred dollars, such as $200 for many secured cards, up to $1,000 for some unsecured options. A manageable initial limit encourages responsible spending and helps prevent accumulating excessive debt. As you demonstrate responsible use over time, issuers may increase your credit limit.

Rewards programs, such as cash back or points, allow you to earn benefits on purchases. While attractive, for a first credit card, the primary focus should be on building a positive credit history rather than maximizing rewards.

Applying for a Credit Card

The application process for a credit card involves providing specific personal and financial details to the issuer. Preparing this information beforehand can streamline the submission.

Applicants typically need to provide their full legal name, current address, date of birth, and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Information regarding your annual income and employment status, including your employer’s name and how long you’ve worked there, will also be requested. Some applications may ask about your housing costs, such as rent or mortgage payments, and and whether you own or rent your home.

Most credit card applications can be completed online through the issuer’s website, though in-person applications at a bank branch are also an option. Before submitting, carefully review all terms and conditions, including the APR, fees, and credit limit, to ensure you understand the agreement.

After submitting your application, the credit card issuer will typically provide a decision within 14 days, though some approvals can be instant or take only an hour. If your application is denied, the issuer is required by law to send you an adverse action notice within seven days, explaining the reasons for the denial. Common reasons include insufficient income, limited credit history, or a low credit score. If denied, it is generally advisable to wait at least six months before re-applying to allow time to address the reasons for denial and for your credit profile to potentially improve.