You may have heard that it’s a good idea to start building credit history as early as possible. That usually starts with a credit card.
But how old do you need to be to qualify for a credit card? How do you actually go about applying for one? And when do you know you’re financially ready?
When can you get a credit card?
You must be at least 18 years old to get your own credit card as a primary cardholder. But unlike buying cigarettes or a lottery ticket, your age is not the only factor that matters.
To qualify for a credit card, you generally need to have an established credit history and a reliable source of income — two things that many 18-year-olds do not have. If you don’t have credit history and steady income, you might need to add a cosigner to your card application to increase your chances of approval.
If you aren’t 18 yet, you may be able to become an authorized user on a parent’s credit card. Authorized users can use a credit card like anyone else, but they are not responsible for paying the bill. If you run up a huge balance on your parent’s card, they will be liable for it.
The minimum age required to become an authorized user on a credit card depends on the card issuer — and the figures vary substantially. For example, American Express has one of the lowest age requirements at 13 years old, while U.S. Bank requires that children be at least 16 years old. Other card providers do not have a specific minimum age requirement.
When are you actually ready for a credit card?
Although you can technically qualify for a credit card as a primary cardholder at age 18, or as an authorized user while you’re still legally a child, remember that can ≠ should. Using a credit card irresponsibly can lead to cycles of debt, tons of fees, and serious damage to your credit score.
Given a credit card’s risks, you should only get a credit card when all of the below apply to you:
You spend less than you earn
If you regularly overdraw your bank account or constantly borrow money from friends, you need to improve your fundamental financial habits before you apply for credit. Poor impulse control combined with increased access to credit is a recipe for ending up with tons of high-interest debt.
Try to go one year without overdrawing your checking account or borrowing money. Pass that milestone and then you can consider applying for a credit card.
Read more: How to use a credit card responsibly
You have a budget, and you stick to it
Creating a budget makes you more aware of where your money is going and how much you can really afford to spend each month in different purchase categories (groceries, dining out, etc.). Those set limitations make you less prone to impulse purchases and reduce the chance that you’ll end up with a credit card bill you can’t pay off in full.
You pay your bills on time
Do you have a habit of forgetting to pay monthly bills, like rent or utilities, on time? Unless you work on being more punctual, that same behavior might carry over to your credit card payments. And the penalties for missing a card payment are brutal.
Your card issuer can legally charge you up to $29 for a first missed payment. Repeated missed payments can incur penalties of up to $40 each.
What’s worse, some card issuers might also increase your card’s APR if you miss a payment (called a penalty APR). A penalty APR of around 30% can lead to astronomical interest charges if you don’t pay your card bill in full each month.
Why bother getting a credit card at all?
Given a credit card’s potential financial hazards, why not just use a debit card or pay with cash instead?
Credit cards help you build your credit score
Opening and using a credit card responsibly in your teens can help you build a good credit score, which makes life a lot easier when you enter adulthood. Making all your purchases with a debit card or cash, on the other hand, won’t affect your credit score at all.
Having good credit will help you land an apartment, sign up for utilities without a deposit, and even save on your car insurance premiums.
A solid credit history means that you’re a responsible borrower, and therefore more attractive to lenders. If you’re interested in buying a house at some point, you can only qualify for the lowest interest rates if you have excellent credit.
Read more: How your credit scores affect mortgage rates
The two keys to building good credit are to pay off your card balance on time and be mindful of your credit utilization percentage. On-time payment history makes up 35% of your credit score and is the most important component in building and maintaining good credit. If you have a limited credit history, it’s even more crucial to make payments by their due dates.
Your credit utilization ratio is the amount of credit you’re using from your total combined credit limit across all your credit products. Having low credit utilization makes up 30% of your credit score. If you use more than 30% of your credit limit, your credit score may get dinged. For example, if you have a $1,000 credit limit, try to keep your card balance under $300.
Some credit cards offer valuable ‘extras’
Higher-end credit cards might offer cash back or rewards points for every purchase you make. These cards might also provide special travel-oriented benefits, like a suite of travel insurance or waived foreign transaction fees. Comparable benefits are rarely offered by debit cards.
That said, keep in mind that these perks aren’t always offered for entry-level credit cards, like secured or student credit cards.
Read more: 12 perks of using credit cards
Credit cards offer strong fraud protection
The majority of credit cards come with zero liability; their cardholders aren’t held responsible if a bad actor fraudulently uses the card to make unauthorized purchases.
Victims of debit card fraud, however, are afforded more limited legal protection. A cardholder is liable for debit card fraud ranging anywhere from $50 to an unlimited amount, depending on when they report the card lost or stolen.
Read more: Cash vs. credit. vs. debit — which should you use?
How to get a credit card for the first time
Opening a credit card is fairly simple. Start by researching which cards are the best in different categories. Then choose the best card for your needs and lifestyle, and fill out its application online. You’ll usually be asked to provide your full legal name, address, contact details, employment and income information, Social Security number, and more.
After you submit your application, the card issuer may provide an instant decision or notify you later. Sometimes, they will ask for more information before deciding. If you don’t hear back instantly, you’ll often get a letter in the mail a few days later.
Read more: How to apply for a credit card
What’s a good first credit card?
If you want to get your first credit card and are over the age of 18, the best place to start is either with a student credit card or a secured credit card.
Secured credit cards
There are two types of credit cards: secured and unsecured. A secured card requires a deposit, which will serve as collateral for purchases charged to the card. The deposit protects the card issuer in case the customer stops paying their bills. Secured cards are designed for consumers who are either rebuilding their credit or who have a limited credit history.
An unsecured credit card does not have any collateral behind it; most credit cards are unsecured. Unsecured cards are more likely to offer cash back, rewards, or sign-up bonuses.
Here’s our list of the top secured cards.
Student credit cards
A student credit card is an unsecured credit card geared toward college students. Student credit cards usually have lower credit limits and fewer perks than higher-end cash back or rewards cards, but they are easier for students to obtain.
Most student credit cards do not have annual fees, and their card issuers are willing to accept student applicants with no credit history. However, if you have bad credit, you may have trouble being approved for a student card. In that case, a secured credit card may be your only option.
Here’s our list of the best credit cards for students.
Summary: When should I get a credit card?
If you feel that you can handle the responsibility of a credit card and want to build your credit history, then opening a credit card may be the right move for your financial future.
When you open a credit card, track your spending to ensure that you don’t go over budget and rack up a balance you can’t afford. And avoid interest charges by always paying off the card balance in full and on time.