Minors seeking a credit card will need a helping hand from parents
Dear Opening Credits,
I'm 16 and want a credit card. How can I get one? How else could I build my credit at my age? -- Kristina
Dear Kristina,
Sigh. You're a girl after my own heart, Kristina. Though I didn't really
become fascinated by personal finance until my college years -- living on
pennies inspires imaginative budgeting -- I think it's fantastic that you're
thinking about these issues at such an early age.
Be aware that
there are two basic reasons to get a credit card. The first is to have a safe,
convenient way to purchase the items you want and need to buy. The second is
what you mentioned -- to create a credit history. A long, positive record of
using credit paves the way for all sorts of fabulous things, from obtaining
inexpensive loans for cars and homes to being appealing to landlords and
employers to gaining access to premium plastic equipped with very cool perks.
I'm sorry to
say that getting a credit card on your own may not be so easy. In general,
minors cannot enter into legally binding contracts -- which is what credit
accounts are -- so an individually held card is probably not an option for you
right now.
There may be
another way, though, to build a credit history before you turn 18. It's by "piggybacking"
on someone else's credit card account as an authorized user. This means you'd
have a credit card with your name on it and enjoy charging privileges, but
because the account wasn't granted to you based on your financial information
and credit history, the ultimate payment responsibility would fall on the
actual account holder's shoulders.
Now, I only
recommend these types of joint accounts with extreme caution as they carry
considerable risk to all concerned. The payment activity and account balance
history appears on each cardholder's credit report, so if any of you mess up
(pay late, charge over the credit limit, etc.), everybody's reputation suffers.
However, as long as all parties use the account responsibly, it can work.
Your parents
are the obvious choice to approach about being added as an authorized
user. However, before you do, become perfectly clear about how to use a credit
card well. The directions are actually quite easy -- a lot of adults just
overcomplicate it. All you need to do is charge the amount you will (not can, will) repay when you get the bill. If,
for some reason, you would be handling the account management side, pay on time
and read every statement for account changes, errors and identity theft issues.
If you spot or anticipate problems, address them with your credit issuer
immediately.
Believe you
can handle that? Then have a formal talk with your parents and explain what you
want and why you want it. Let them know that you recognize how to use credit
correctly, and ask that they add you to one of their accounts. The discussion
should include:
-
What
you'd like to use the card for.
-
Whether you need permission before charging certain or all items.
- What the
consequences for misuse are.
If each of you
agrees to the terms, follow it up with a written and signed contract. Then your
parents would need to contact their credit card company and request you be
added as an authorized user. A card sporting your name will soon be mailed to
them.
In the event
that your parents do not consent to the deal, I wouldn't blame them and neither
should you. Credit is serious business, and it's sensible for them to be highly
protective of their finances and credit report.
So what can
you do? Well, thank them for their time, say you understand why they denied
your request, and tell them that you'd like to review the deal again a year
from now. During that time, take initiative and prove your trustworthiness: get
a part-time job, save your earnings, borrow a little from them here and there
and pay them back on time -- or even better, early. While these actions won't
do a thing for your consumer credit file, your rating as a dependable and
money-smart daughter will surely rise.
See related: Piggybacking, meant to jump-start credit, can backfire, Authorized users don't have to pay for cardholder missteps
Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.
Send your question to Erica.
Published: November 11, 2009
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