Teenagers have to wait until they turn 18 or older to apply and receive their own credit card, but financially savvy parents may put a card in their children’s hands before then in order to teach them about credit and financial responsibility. Choosing the right card for a tween or teenager depends on the child's age, maturity, and financial skill.
The Tweens (11–13 years)
If your child doesn't have a bank account, now is the time to open one. Being able to access a debit or a prepaid card connected to their own bank account is a step in learning how to manage money.
- Tweens and teens can share credit cards with adult family members or guardians.
- Virtual family “banks” can help teach credit and banking lessons, without opening an actual credit card.
- Secured and student cards, like those offered by Citibank and Discover, are two types of credit cards available to young adults.
- Cosigning a credit card for a young person may help them build a solid credit history in a safe environment.
One interesting variant on this idea is FamZoo, a virtual family bank: All of the family’s prepaid debit cards are connected to the parents’ card, which is the funding source for the other cards. Parents can supervise all the activity on the kids’ cards, automate pay for chores and allowances, deduct expenses, and even pay interest on savings. The system is designed to teach kids how to budget, save, and use plastic responsibly.
Options for Older Teens (14–17 years)
To teach older teens about the very real risk of running up credit card debt, many parents choose to add their child as an authorized user or joint account holder on one of the parent’s accounts.
A teen under age 18 can’t get a traditional credit card in his/her own name, and a person age 18 to 21 can only get one with a cosigner or verifiable income, as per the Credit CARD Act of 2009.
This establishes a credit history on the child’s credit file and puts him or her in better position to qualify for a traditional card when the time comes. As the primary account holder, the parent has full control and supervision of the account. An obvious disadvantage is that the parent is responsible for the account and any charges incurred. In fact, the damage can go in either direction: the child’s credit will suffer if the parent fails to make payments on time or carries a high balance.
The parent can add the child to an existing account or can establish a new account specially designed for teens. For example, the DFCU Student Visa Platinum card for 14-to-17-year-olds, with a parent or guardian as a co-signers. The credit limit on the card is between $250 and $1,000, based on the parent’s credit worthiness. This type of card, and there others out there, offer young teens the opportunity to learn to how to manage credit and build financial credit skills in a safe environment.
Establishing Credit as Young Adults (18+)
Older teens are legally allowed to obtain their own credit card (with verifiable income if under the age of 21). This is a great time to encourage a young adult to take on a greater level of financial responsibility. First-time credit card options are generally secured cards or student cards.
A secured card is one that sets a credit limit based on the size of a security deposit placed on the account, typically $300 to $500. The deposit is held as collateral against default. Transactions are handled in the same manner as they are on traditional accounts: the user makes purchases, the purchases show up on the statement, and the user makes the required payment by the due date.
In choosing a secured card, look for one that reports to the credit bureaus as unsecured (more favorable), has a grace period for paying off purchases without incurring interest, has a low or no annual fee and has low fees overall. Interest rates will be on the high side compared with unsecured cards, but ultimately shouldn’t matter because the goal is to teach the teen to pay the balance off every month and avoid paying interest altogether.
Few secured cards will score a high grade on every factor, but several are worth consideration. The Harley-Davidson Visa Secured Card has no annual fee and a 24+ day grace period. It is not a student card, but because it caters to folks who are trying to rebuild their credit, it also offers a solid platform for new credit card customers, as It reports to the credit bureaus as secured.
The Capital One Secured MasterCard comes with no annual fee, and very few additional fees, like for foreign transactions—making it a good choice for a young person planning to travel outside the U.S. or spend a college semester or year abroad.
Student Credit Cards
A student card is preferable to a secured card because no cash deposit is required. It’s a traditional credit card tailored to students or first-timers. That usually means a modest credit limit, but can also mean gentler treatment of people who are still learning how to handle credit responsibly and who may make a mistake now and then. A student credit card allows a young adult to learning to build a healthy credit history.
The Discover it® Student Cash Back card is a no-annual-fee rewards card that won’t impose a penalty rate on the account if the cardholder pays late. Plus the late payment fee is forgiven on the first occurrence. If you apply for the Discover it card and are turned down, Discover might extend an offer for its secured card instead. It’s an excellent option and one of the most favorable secured cards available.
The Journey Student Credit Card from Capital One is a no-annual-fee rewards card that pays bonus rewards to cardholders who pay their bills on time.
Most student cards, including the Discover it Student Cash Back card, require proof of education from the applicant.
The Bottom Line
A credit card is a great tool for teaching a tween or teen about credit, credit cards, credit monitoring, budgeting, and money management. Even parents who haven’t handled credit cards perfectly in the past can help their children start their financial lives on the right foot. As with any skill, money management requires a great deal of practice, so encourage your child to both use and pay off balances each billing cycle.
And for any card, read and make sure to understand the terms, conditions, and fees before applying, and make sure your tween or teen cardholder does too.