Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Opening Credits,” a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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
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.
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