Having access to credit via some type of credit card can be a gift or a curse, depending on how that card is used. We live in the age of consumerism — in an economy that is driven and underwritten by debt. What this means is that most people spend more money than they make, meaning that a lot of the purchases are paid for through the extension of credit. This tends to drive many people deeper and deeper into debt. On the flip side, some people use credit cards as a form of convenience. Credit cards are easy to use in point of sale purchases. Additionally, credit cards can be used to make only purchases.
Credit cards can also be a great tool in teaching children who are rapidly approaching adulthood how to manage money and control their spending properly. But, how old do you have to be to get a credit card? You might be surprised. Each state makes up their own laws and rules that govern the ages in which a person can do certain things legally in that state. These rules include the legal age to drive, smoke, drink alcohol, and obtain credit.
In most states, you must be at the legal age of adulthood, which is predominantly 18, before you can legally obtain a credit card for yourself.
Before going into the process of obtaining your first credit card, there is something else that you should be aware of. While a minor cannot legally apply for credit, they can be added to their parents’ credit accounts and issued a card. In this instance, the parents are solely responsible for the debt accrued by the teenager. While the teenager is legally off of the hook for the things they charge on the card, they will still be held accountable by their parents — at least in most situations. Another point to be aware of here is that the teen will not be building their credit on the account. Only when you are legally responsible for the charges you make on a credit account will your payment history be reported to a credit reporting agency.
Teens under the age of 18 can also get what is known as a prepaid credit card. This is not a credit card because there is no credit extended. The card user must load money onto the card, and their limit will be the balance that is loaded on the card. So, all purchases made on a prepaid card are paid out of pocket. Basically, the card is simply a convenience tool.
Now, back to 18-year-olds. While being 18 means that you are legally old enough to obtain and credit card and be held responsible for adhering to all of the terms and conditions, it is not as simple as applying for one. Every person who applies for a credit card is subject to approval. Not only do lenders require that cardholders can repay the debt they accumulate on the card, but there are state and federal laws that also dictate that anyone accruing debt must have a viable source of income to support repayment. So, anyone applying for a credit card will need to have some verifiable source of income. FYI, your monthly allowance will not likely qualify and a source of income in this instance.
When looking for the best card for an individual under 20, you should focus on cards that are designed for students. Another good place to start is with a revolving credit account at a retailer or department store. These accounts don’t require as much for approval. They normally begin with low credit limits and then the limits increase as you make consistent on-time payments.
Another good move in applying for your first credit card is to apply for a secured card. A secured card is a card that is backed by money you put into a special savings account. The money in the account is never touched. All purchases made on the card are treated like normal credit card purchases. The savings account is simply to cover the debt on the card should you not pay.
In most situations, a person must be at least 18 to obtain a credit card legally, but there are exceptions to the rule. You should check the laws and regulations in your state to find out how they apply to your situation.
Written by Rick Wallace
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