Most people apply for a credit card when they start college or some other form of higher education, especially when they stay far from their parents or start earning their own money. In such a case they generally have zero credit history until the age 18. If you are a parent or a grandparent, you don’t want your teenager to be in a bad financial situation.
Here are 3 Ways to Get a Credit Card for a Teenager.
1) Add Them as an Authorized User
You can add your teen as an authorized user onto your account so that they can enjoy the benefits of having a credit card and also boost their credit score from an early age. It is a wise financial decision to let your teen responsibly use your credit card. By adding them as an authorized user they can use the card up to a fixed limit, so they can definitely use it to buy their books, food, and other study material.
Don’t worry about hurting your own credit score as your teen’s credit score won’t affect yours. You will not be responsible if they fail to pay the premium in time or abandon the credit card without following the proper procedures. They are the one who will face problems getting credit in the future. So, add your teen as an authorized user and let them learn how to manage their finances. It will greatly help to prepare them for their own financial future.
2) Get a Secured Credit Card
Since a teenager has no credit history, there is a very low chance of your teenager getting an unsecured credit card. To use a secure credit card, you have to deposit a certain amount that the credit card company will use as a collateral. The amount you deposit will be the user’s credit limit.
Most banks have a fixed least amount that you have to deposit. It is around $300-$500. For instance, if you deposit $600 after approval of your secure credit card, your teenager will only be able to spend $600. The credit card company assigns a FICO score based on the difference between the credit limit and current balance. The higher the difference, the higher the FICO score.
3) Get a Low-Limit Credit Card
Credit card companies protect themselves from trouble makers by letting them use a low limit credit card. By trouble makers, I mean people who have a bad credit history or someone who has a criminal record. The credit card companies don’t want people to misuse the credit card, so they provide a low limit credit card which has a high interest rate, high annual fee, and low credit limit.
You can use a low limit credit card to help your teenager build credit. Even though you have to pay high interest and an annual fee, it’s worth it in the long run. Think about it this way, your child or grandchild is not going to be spending a lot of money anyways, they just want to build credit, so why not invest $200-$400 per year to build a good credit history?
Don’t just get any credit card available in to you. Do your research and take time to read all the terms and conditions mentioned in the credit card brochure. You son or daughter is relying on you for financial help. You don’t want to see them in a dire situation once they’re on their own.