You know that it is important to start building a credit history from a young age, but how early is too young? Learn whether 16-year-olds can get credit cards and what alternatives they have.
No, a 16-year-old cannot get a credit card. You must be at least 18 years old to get a credit card. However, a 16-year-old can become an authorized user of a credit card. They can also use similar options, like debit cards, prepaid cards, and certain payment apps.
Take a closer look at why 16-year-olds can't have a credit card. Then, explore how they can still access a credit card and what other payment methods they can get for themselves.
Credit Card for 16-Year-Old – What You Need to Know
You must be at least 18 years old to get a credit card. As such, you will not find a credit card for a 16-year-old. The other important requirement of most credit cards is income, which few 16-year-olds can show. But there are still ways for 16-year-olds to legally use a credit card and some alternative payment methods to consider.
Why You Can't Get Credit Cards for 16-Year-Olds
There are two main reasons why a 16-year-old can't get a credit card.
You Must Be at Least 18 to Get a Credit Card
The most important reason is that you can't get a credit card until you are 18 years old. This is the law, and you will not be able to get around it.
You Need to Show Income
On top of the legal age requirement, few 16-year-olds would be approved due to their lack of income. The Credit Card Act of 2009 requires that anyone under 21 years old has proof of an independent income. This can be via a job or a scholarship. But if you don't have proof of income, even an 18-year-old will not be able to apply for most credit cards.
The caveat is that 18-year-olds without independent income can get a credit card with a cosigner. That cosigner will need to be at least 21 years old and have proof of income.
Why 16-Year-Olds May Want a Credit Card
There are two main reasons that a 16-year-old may want a credit card. Either they want to start building their credit, or they want to be able to use a credit card for expenses.
Building your credit is important, and given that your credit history is one of the factors affecting your credit score, it makes sense to want to start early.
In terms of spending, although rare, there may be some things you can only buy with a credit card, and a debit card may not work for the situation. Or maybe a teen wants to be able to buy things on credit. Of course, the desire to buy things on credit is a slippery slope. Given that many 16-year-olds don't have much financial understanding yet, this is a bad idea. That is part of why you must be at least 18 to get a credit card.
Credit cards are also incredibly useful to have on hand in emergencies. While 16-year-olds are less likely to have emergencies than adults, they still might. For example, maybe you run out of gas but don't have cash on you.
Additionally, credit cards tend to be more secure than debit cards, at least in fraud liability. You are likely to get your money back if your credit card is stolen. This is possible but not a guarantee with a debit card.
16-Year-Olds Can Become Authorized Users on a Credit Card
While you cannot get a credit card at age 16, you can become an authorized user on someone else's credit card. It is especially common for parents to add their teenage children as authorized users on their cards.
What It Means to Be an Authorized User
An authorized user has permission to use the credit card legally. However, they are not responsible for paying the bill. When the authorized user buys something with the card, it will go toward the total balance on the card. Any balance from authorized users goes toward the credit limit on the card. Essentially, you can use the card but aren't responsible for it.
Authorized users receive a credit card that has their name on it. This is important as it means that it will be in the teen's name. That prevents potential issues when a store asks for ID if the teen were to use a card with their parents' name.
How Old Do Authorized Users Need to Be?
Every credit card issuer will have slightly different terms, so there is no standard age at which you can become an authorized user. However, you should be able to find options for users above 15 or 16 easily.
The Authorized User Can Have a Limit
It is natural for parents to be worried about handing their kids a credit card that the parent will pay off for them. This is especially true in the case of a first credit card, as a teen may not fully understand how they work.
Because of this, many credit cards let you place a limit on the amount that an authorized user can spend per month. Keep in mind that this will not be enabled by default; the cardholder will have to set the limit.
Does Being an Authorized User Affect Credit Score?
Adding an authorized user to a card does not lead to another credit check. But it will appear on their credit report in many cases. Keep in mind that some credit card issuers, such as Wells Fargo and American Express only report users who are at least 18 years old.
Overall, becoming an authorized user is a great way for teens to start building their credit scores early. It also means that teens should be hesitant about becoming authorized users on cards with late payments. If, however, the credit cardholder has excellent financial habits and always pays their bill on time, it can be an excellent method of building credit.
Be Clear on Who Pays
Although the credit cardholder is legally responsible for the authorized user's charges, they may expect to be paid back. Whether you are the cardholder adding a teen as an authorized user or the teen becoming an authorized user, make sure you are clear on who will be paying. If the authorized user is expected to pay back the cardholder for their purchases, make it clear upfront. This will prevent fights and potential late payments.
Alternatives to Credit Cards for 16-Year-Olds
Not every 16-year-old has someone willing to or can add them as an authorized user to their credit card. If this is not an option or a teen wants a completely independent payment method, there are other options available.
The closest option to a credit card would be a prepaid credit card. You load these cards before using them, much like you would with a gift card. When you buy using the card, the purchase gets deducted from your balance. You don't have to worry about making a monthly payment, a credit check, or an age requirement.
However, fees for prepaid cards can be high. There may be fees charged every month and with every transaction or reloading.
Debit Cards (With a Joint Bank Account)
16-year-olds will still need a parent's assistance to open a bank account and get a debit card, but this is another option. The debit card connects to the teen's bank account and automatically debits the purchases from the balance. The main concern with a debit card is potential overdraft fees.
As mentioned, 16-year-olds can't open their bank accounts. You must be at least 18 to open a bank account on your own in the United States. But minors can open a joint account with their parents.
Payment Apps and Mobile Wallets (With a Parent)
Another option is to use payment apps or mobile wallets like Venmo, PayPal, and Cash App. The familiar caveat is that you need to be at least 18 years old to open an account with these apps. You will also have to link a payment method, such as a bank account, a debit card, or a credit card.
A 16-year-old would have to ask their parent to open an account in the payment app. Then they would have to allow the teen to use it. But this is far from an independent option.
Credit Card for Teens – Always Understand How They Work Before Getting One
The most important thing to remember is that you need to understand how a credit card works before getting one. This includes adding a teen as an authorized user. Parents should sit down with their teens and explain how a credit card works, including at least the following:
- Monthly payments
- Interest payments
- Annual fees
- Credit scores
- Credit utilization
Only then should they add their teen as an authorized user.
Keep reading: How to Negotiate Credit Card Debt [DO'S AND DON'TS]
A 16-year-old cannot get a credit card, as you must be at least 18 years old to do so. However, they can become an authorized user on someone else's credit card. 16-year-olds can also open a joint bank account with their guardians and get a debit card or use a prepaid credit card.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.