Several years ago, credit cards were getting handed out like flyers to 18-year-olds moving into their first dorms. Free food was often offered as incentive to apply, which was the main reason many college students lined up to fill out applications while promising themselves, “This is just for the free pizza. I’ll only use this credit card when I have the cash to pay it off in full.” Some stuck to that promise, others went into credit card debt.
Thanks to the Credit CARD Act of 2009, credit cards are no longer thrust upon impressionable teens in this way. Still, the question remains: When is the right time to start building your credit, if not 18? The answer will depend on your spending habits and lifestyle, but let’s discuss!
What’s the right age to get a credit card?
The “right” age is the age when you can responsibly use a credit card — in other words, you can pay off the balance in full each month without neglecting your other financial responsibilities. You should start building credit as early in adulthood as you can, but not at the expense of accrued interest and late-payment fees.
Along with responsibility, you’ll also need the income to pay off your card each month. Ideally, you’ll make enough to cover your regular bills, credit card expenses, any other debts, and savings. Don’t spend up to your income on your credit card each month if at all possible. If you find your expenses exceed your salary, trying cutting them back or increasing your income.
I’m under 21 and no one will give me a credit card!
While age 18 is technically adulthood, many adult privileges are saved for those 21 and older. Obtaining a credit card may be one of these rights denied to 18 to 20-year-olds, especially if they are college students without full-time income. If you think you’re ready for responsible credit card use before age 21, this is a problem.
The 2009 Credit CARD Act requires all applicants under 21 to get a credit card cosigner unless they can prove adequate full-time income. Most college students don’t work enough hours to hit this full-time requirement and therefore will need to get a family member or friend to cosign for them.
However, just because they can get a cosigner, doesn’t mean they should. While most cosign relationships start with the best of intentions, 75% of cosigners end up footing some of the bill. If you ask someone to cosign and happen to miss a few payments, you’ll damage that person’s credit. As a general rule, cosigning isn’t a good idea if you want to preserve your relationship.
OK, so I’ll skip the cosigner, what are my options?
If you can’t get approved for a regular credit card on your own, and don’t want to use a cosigner, a secured credit card is your best bet. A secured card is backed by a cash deposit equal to its limit, effectively eliminating the bank’s risk. This allows you to build your credit and eventually transition to an unsecured card for further credit-building.
Here are a few of our favorite secured credit cards to get you started. Once you qualify for an unsecured card — or one that doesn’t require a deposit — we recommend a rewards credit card that will earn you cash or travel rewards on purchases.
Bottom line: Start building your credit when you have the income and spending habits to use credit without accruing interest or missing payments. If you happen to be under the age of 21 when you meet these criteria, or you’re just having trouble getting approved for a card, start with a secured credit card until you can be approved for an unsecured card. Most importantly, be honest with yourself. If you know you aren’t ready to use credit responsibly, hold off on getting a credit card until you’re prepared to use it wisely.