In this article, we will learn how and why credit cards have age limits.
Can a 16-year-old get a credit card?
Since the legal age to enter a credit card agreement is 18 in most states, you will not be able to get your own credit card at 16.
Once you turn 18, you can get a credit card on your own, but there are some conditions. Credit card issuers will have to ensure that you have enough income to pay off the amount due on the credit card monthly. You can still get a credit card if you don’t have a job or if you’re not earning enough, but you will need someone who is 21 or older to apply with you.
You don’t have to wait until you are 18 to try using credit cards. There are options to get a credit card at 16 if your parent, relative, or adult friend is willing to help.
How do authorized users work?
You can be an authorized user on someone else’s credit card, like your parent’s, usually by the time you are 15 or 16 years old, depending on the credit card issuer’s terms. As an authorized user, you can make purchases using the credit card, but you are not legally responsible for paying the charges. You will receive a credit card in your name, but you will share the credit limit with the account holder.
What can authorized users do?
As an authorized user, you will share some privileges with the primary cardholder, but some credit card features may not be available.
For example, you can make purchases and payments, check the balance, report a lost or stolen credit card, dispute charges, and remove yourself from the account. You will not be able to request a credit limit increase, add another authorized user, request a lower interest rate, or close the account.
How to add an authorized user
Any adult can add another person as an authorized user on an existing account or add you to a new account. This can be a relative, friend, or another adult who agrees to add you to their account. The account holder can add you to the credit card by logging into their account online, through the mobile app, or by calling the credit card issuer. They will need to provide the credit card issuer with your name, date of birth, and social security number to complete the application.
Note: Credit card issuers do not require credit checks to add authorized users. This means that the authorized user’s credit check result will not be affected.
Benefits of a credit history
Being an authorized user can help you develop good credit card habits, but this is not the only benefit. You can also speed up the start of your credit history. The account record is added to your credit report and is reported monthly, which can contribute to establishing and enhancing your credit if the account record is positive.
Consequences of overspending
It’s important not to charge too much on the card you are using. Part of the credit score depends on how much credit you are using, and high balances can cause your credit score to drop.
It is also important to maintain a low balance to keep a healthy financial status, with monthly payments you can afford. Charging too much can make it difficult to keep up with your payments, and late payments mean that you will be charged fees. Late payments over 30 days are usually reported on your credit report and can affect your credit score.
Options
Alternatives for Payments for 16-Year-Old Young Adults
As an alternative to credit cards, there are other payment options for 16-year-old young adults who may not have someone to make them an authorized user.
Prepaid Card
A prepaid card allows you to spend money that you have loaded onto the card in advance. Your purchases are deducted from your card balance, and there are no credit checks or monthly payment requirements. You can purchase the card and reload it at many retail locations like CVS, Walgreens, and Walmart.
The biggest thing to watch out for is the fees, which can slowly chip away at your balance. Common fees with prepaid cards include monthly fees, transaction fees, reload fees, and paper statement fees.
Debit Card
A debit card is similar to a prepaid card, except it is linked to a checking account. Purchases made with a debit card are deducted from your checking account balance. Unless you opt-out, purchases that exceed your available balance may incur overdraft charges. At age 16, you will need your parents to open an account with you.
Payment Apps
Payment apps allow you to send (and receive) money to friends and some businesses using a linked account – either a checking account, debit card, or credit card. You must be at least 18 years old – or of legal age in your state – to open your own account with apps like Cash App, PayPal, and Venmo. Your parent may be willing to open an account for you if you share a bank account, but the actual payment app account will not be in your name.
Apple Pay is a more flexible option for sharing a payment app among families that own iPhones, iPads, or Apple Watches. Once your parent adds you to Family Sharing, you can use the app to send money or make purchases at participating stores.
Conclusion
It is possible to get a credit card at the age of 16, but you will need a parent or another adult to apply with you or to make you an authorized user on one of their credit cards. For teens who want to make purchases or build their credit, there are several alternative options to credit cards.
Frequently Asked Questions (FAQs)
What is the usual annual interest rate for a credit card?
When it comes to typical annual interest rates, the lower the better. The average typical annual rates were 20.55% as of May 3, 2022, according to data collected by The Balance. Typical annual interest rates can vary depending on the type of credit card. For example, the typical annual interest rate on a student credit card is lower than that of a cashback credit card.
How can you use a credit card to build good credit?
Keeping your balance low and making timely monthly payments are two key things you can do to build good credit. Together, these two factors make up more than half of your credit score. Keeping your account open for a longer period also helps to establish a longer credit history, which builds good credit as you gain more experience using credit.
What is the difference between a charge card and a credit card?
With a credit card, you have the option to pay off your balance over time as long as you make the minimum monthly payment. A charge card, on the other hand, requires full payment each month to keep your account in good standing and avoid high interest charges. Credit cards have a fixed credit limit, while charge cards do not have a pre-set spending limit.
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Source:
https://www.thebalancemoney.com/can-you-get-a-credit-card-at-16-5203634
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