The rules about credit cards have changed, and if you’re younger the 21, you may be affected. According to the Credit CARD Act of 2009, card issuers can no longer lure you with free t-shirts and pizza during Freshman Welcome Week, and there’s more. New restrictions mandate a more gradual system of eligibility for independent credit. Here’s what you can do, going from most restrictive to least.
At any age: Become an authorized user or co-signer
While individual companies may set minimum ages, legally, there is no limit on when you can procure credit. If you have a social security number, and your parent, or another adult – anyone over 21 with a strong credit history and income would technically qualify – is willing to add you as an authorized user or co-signer on their credit account, you’re good to go. As an authorized user, you can make charges to the account, but the primary cardholder is liable for the bill. As a co-signer, all people on the account are liable. This may seem like a win-win, but consider the specifics:
- Your parents’ credit mistakes can hurt you. While signing on to your parents’ account could allow you to benefit from their financial responsibility – earning you more favorable interest rates or other perks, or getting you credit at all – it could also backfire if they haven’t always paid their bills. Not all credit bureaus count card misuse equally against authorized users, but to be safe, if your parents’ credit tanks, you should ask to be removed from the card.
- Your parents are on the hook for your debt (and missed payments). Just as your parents’ use of a shared card affects your credit score, your use of the card affects theirs and your own. The issuer may not be able to come after you with the bill, but if you run up a high balance, it could impact you and your parents for years to come.
Bad credit has serious consequences. You may have difficulty getting approved for a car loan or mortgage in the future, and if you are approved, you may face sky-high interest rates. You may even have a difficult time getting an apartment or a job, so if you’re not sure you can handle credit, there’s no need to start young.
18 and above: Get your own credit card (possibly)
Before the Credit CARD Act, 18 was the magic age at which you could sign up for your own credit card no matter what, but this is no longer true. While you can still technically get your own credit card when you turn 18, your eligibility depends on your employment situation.
If you have a full-time income, you can get your own credit card, no co-signer needed. The definition of a full-time income varies by credit card issuer, but it’s usually at least $10,000. If not, you have two options:
- Ask a parent or guardian to co-sign. This option is still available to you after you turn 18. This is typically the best option, since you’ll qualify for better rewards and lower fees.
- Get a secured credit card, which doesn’t require a full-time income. However, you will have to post an upfront deposit, usually equal to your credit limit. It’s a good way to build credit if you don’t have a co-signer.
Of course, you can also remain an authorized user on your parents’ card for as long as you like. If you’re still unsure about your credit readiness, this may be the safest option.
The myth of 21
The Credit CARD Act of 2009 generated a few myths along with its consumer protections. The first is that you can get your own credit card when you turn 21, regardless of your employment. In reality, you’ll need a co-signer if you don’t have a full-time income, no matter your age. The only exception is for homemakers who have a “reasonable expectation of access” to the household’s income – for example, a stay-at-home spouse.
The second myth is that you need to be 21 to get a credit card on your own. As we saw above, you can get a card at age 18, just as long as you meet the income requirements.
The bottom line
It can be annoying or embarrassing to have to access credit through your parents, or to find someone else to co-sign with you. On the other hand, having a credit card is a huge responsibility, and getting to practice with your parents’ before you move on to your own can also be valuable, along with helping you build a long, stable credit history. And if you can’t access credit, know that there are other ways to build good credit. Keeping up with your student loans and paying bills on time also show future lenders that you’re a safe bet.