Turning 16 is a major milestone. You can finally drive and may start working your first part-time job. Some teenagers also wonder if they should get a credit card at this age.
There are benefits to building credit early. But credit cards come with major risks and responsibilities as well.
Should you get a credit card as a 16 year old? Or should you wait until you’re older?
This guide will walk you through everything you need to know before getting your first card. You’ll learn about:
- Eligibility requirements for minors
- Types of cards suitable for teens
- The pros and cons of early credit building
- How to apply and use a card responsibly
Let’s start with the basics.
Eligibility Requirements for Teen Credit Cards
The eligibility criteria for minor-owned credit cards are strict. Issuers want to minimize their risks when lending to borrowers with little or no credit history.
Age and Legal Considerations
In the United States, the minimum age to apply for a card without a guardian is 18. Some states allow minor-owned cards with guardian consent starting at 16 years old. Other states require you to be 18 or 21 years old before getting a credit card, even with permission.
Be sure to verify your state’s laws before applying.
Parental Consent
For teens under 18, parental consent is mandatory. The card account will be in the child’s name, but a parent must co-sign and take on equal financial responsibility.
Having a parent guide you through the process is wise. They can pass on money management skills and monitor spending during the learning curve.
Income Requirements
Issuers want proof that applicants can handle monthly payments. Teens can meet income requirements through allowances, part-time jobs, trusts, scholarships, or gifts. Minimum figures range from $200 to $500 per month with most companies.
Overall, lenders look for a reasonable ratio between income and the card’s credit limit.
Types of Credit Cards for 16 Year Olds
Teen cards fall into three main categories: secured cards, student cards, and primary cards with parental co-signing.
Secured Credit Cards
Secured cards require a cash security deposit upfront. This protects the issuer if you default. Credit limits equal the deposit amount, usually $200 to $500 for teens.
The deposit isn’t extra spending money. You get it back only after upgrading to an unsecured card or closing the account in good standing.
Secured cards help build credit, but have higher fees and lower limits than unsecured cards.
Student Credit Cards
Student cards cater to teens in high school or college. Benefits include low limits, discounted fees, lenient approval, and cash back rewards on spending.
CardNetwork, Discover Student and Capital One Journey are popular student cards. Some require proof of enrollment while others are open to any applicants under 21.
Primary Cards with Parent Co-Signing
Co-signed cards authorize use of a parent’s account. As an authorized user, the activity affects your credit profile too. But your parent is legally obligated for charges if you default.
An upside is there’s no need for income or a security deposit. And you can benefit from the account’s higher limit and better terms.
A downside is your finances remain tied to your parent's credit through the account history.
Pros and Cons of Getting a Credit Card at 16
Building credit early has advantages. But embarking too soon also poses risks. Consider these factors when deciding the best age to get a card.
Benefits of Early Credit Building
A major plus of early credit is establishing a credit history. Having an account open for many years boosts your score. Breaking the “no credit history” barrier can help with auto loans, apartments, and other needs in your late teens and early 20s.
Another benefit is learning real-world money management. Using a card responsibly helps develop healthy habits like tracking expenses, budgeting properly, and monitoring statements.
Risks of Credit Cards for Teens
On the flip side, lacking financial experience can lead to credit card debt. Teens may overspend without realizing how credit card interest and fees add up over time.
Late or missing payments also hurt your credit score severely at a young age. Missed payments remain on your history for 7 years. Too many dings early on make quality credit harder to build.
Finally, some research links early credit access with poor money habits later in life. Easy plastic spending can condition teens to swipe now and pay the consequences later.
Ultimately, access isn't the problem - financial literacy is key.
How to Apply for a Credit Card at 16
Ready to move forward with a card application? Be prepared with these tips for a smooth process.
Choose an Appropriate Card
Compare different card options at banks or credit card comparison sites. Apply for one matching your eligibility status and goals.
As mentioned, secured cards and student cards are best for new borrowers with little or no credit. Opt for a lower limit between $200-$500.
Provide Required Documentation
Teen applicants need:
- Photo ID proof of age
- Social Security number
- Proof of income
- Permission from a guardian
If applying online, you’ll need to upload documents. For in-bank applications, bring hard copies.
Read the Fine Print Carefully
Don’t skim past the terms and conditions! This document outlines important policies like:
- Fees for late payments, cash advances or foreign transactions
- Penalty APR rules
- Grace periods for purchases
- Required credit score for upgrades
Know what you’re agreeing to.
Using Credit Cards Responsibly as a Teen
When approved, don’t go on a shopping spree just because you can. Follow these practices to use your card responsibly:
Create a Budget
List your monthly income sources and fixed expenses. Subtract expenditures from earnings to find how much discretionary spending room your budget has.
Stick to your budgeted “credit card spending money” each month. Don’t charge more than you can realistically repay.
Make Payments on Time
Set up autopay through your card issuer’s website. Autopay automatically deducts the minimum or full balance each month. This prevents missed due dates that hurt your credit score.
For charges not on autopay, manually schedule payments to arrive 5 days before the due date.
Pay in Full to Avoid Interest
Carrying a balance means paying interest on purchases from the previous month. This gets expensive fast!
Ideally, pay off your statement balance in full each billing cycle. Doing so keeps those purchases interest-free.
The Power of Starting Your Credit Journey Early
Getting a credit card at 16 comes with big benefits, if done responsibly. Building credit early equips you for adulthood by boosting your credit score over time. It also develops important money management habits.
With a parent guiding the process, a teen can learn money basics through credit cards. Start small with a secured card and low limit first. Use it wisely, don't overspend your budget, and make payments on time.
Lay this foundation and your financial literacy will grow alongside your credit history - setting you up for lifelong success.