The Best Time for Young People to Get a Credit Card

It may not seem like it, but it is possible to go through life without a credit card. That being said, when used responsibly, credit cards offer numerous advantages over some other payment methods. They're convenient, protect you against fraud and theft, and sometimes offer cash back and other rewards. They can also help you build the credit history you'll need if you want to borrow money to buy a home or a car. Here are some points for parents and their offspring to consider in deciding when to get that first card.

High School

Why You Shouldn't Wait

Parents who introduce their kids to the concept of handling credit in their teen years may better prepare them for using it responsibly in the future. A credit card probably shouldn't be a high schooler's introduction to personal financial management, however.

As an alternative, some experts recommend opening a youth checking account with an attached debit card when a child is in middle school. Parents can teach the child how to monitor the balance in the account and use their debit card wisely.

After that, they can move on to a low-limit credit card when the child is slightly older. If the child is under 18, the card will generally have to be in a parent's name, with the child listed as an authorized user.

Why You Should Wait

High schoolers can succumb to the same temptation that many adults do to spend more on their credit cards than they can afford to pay back. Plus, if the child is an authorized user on a parent's card, their overspending could reflect poorly on the parent and impair their credit score.

College

Why You Shouldn't Wait

At age 18, students may be eligible for a credit card in their own name. If they don't have a credit history by the start of college, getting a card now will help them begin to establish one. That will be important down the line, when it comes time to rent an apartment or apply for a mortgage.

Many credit card issuers have cards specifically designed for students, but as with any other kind of credit card, it's smart to shop around and compare rates and terms. Investopedia publishes regularly updated lists of the Best Student Credit Cards.

Why You Should Wait

If someone has never had a debit or credit card by the time they go to college, it might be safest to start with a debit card linked to their own checking account or a parent's. Many student credit cards have high interest rates, so it's easy to run up debt, especially if they miss a payment or two.

In addition, parents can't easily supervise their children's credit card spending habits when they're away at college, so it might be a bad place for them to experiment with credit for the first time.

Wouldn't it be worse to wait until after graduation? Maybe, but paying with cash or debit will keep them out of trouble. Starting adult life with a load of high-interest debt and/or a poor credit history puts recent grads at a major disadvantage and can be worse than having no credit history at all.

Recent College Graduate

Why You Shouldn't Wait

Getting a credit card is an easy way to establish a credit history and begin to build a solid credit score. Plus, a credit card is sometimes required for things like renting a car or booking a hotel room.

Grads who don't have enough of a credit history to get a conventional credit card can start out with a secured credit card. That's a special type of card that requires the cardholder to deposit money with the lender; the deposit then serves as the credit limit on the card. After they've used a secured card for a while—and made all their payments on time—the cardholder may be eligible for a regular, unsecured credit card.

Whatever type of credit card they have, it's important that new grads follow the rules for earning and keeping a high credit score. Credit scores are based on several factors, the two most important of which are payment history (does this person pay their bills on time?) and credit utilization ratio (how much credit are they using at any given time compared with the amount of credit they have available to them?). A person whose credit cards are all maxed out will have a high credit utilization ratio, and their credit score will suffer as a consequence.

Even if the new grad doesn't plan to apply for a mortgage, an auto loan, or another form of debt for which a good credit score is essential, that could change someday. Also, credit scores are used for other purposes, such as setting insurance rates, and prospective landlords and employers may look at them, too. So, establishing a good credit history will pay off in numerous ways.

Why You Should Wait

Anyone who knows they'll have difficulty managing debt might want to forgo getting a credit card until their life is more settled. Credit card companies aren't going anywhere, and the person can always change their mind later.

The Bottom Line

Credit cards are a fact of financial life, and for many people, the benefits of using them outweigh the drawbacks. When someone should get their first credit card will depend in large part on how responsibly they (or their parents) think they will handle it. While establishing a credit history is important, a bad credit history, marred by youthful mistakes, can be worse than no credit history at all. So there's no rush. If a young person isn't ready for a credit card yet, it's fine to wait until they are.