Can teens get a credit card at 16? What other options are there?

Can teens get a credit card at 16? What other options are there?

Credit cards and teens may not sound like a good fit, but giving your teen their own card can be an excellent way to learn about credit management. While teens can't get their own credit cards until they are 18, there are other ways a 16-year-old can pay for purchases. Here's what you need to know.

 

Key takeaways 

  • A teenager under 18 cannot get their own credit card
  • A 16-year-old can get authorized on a parent's credit card
  • Teens can use other digital payment options like prepaid debit cards, debit cards, and ApplePay to make purchases if they don't want to use cash.
  • Using one of the above helps to instill vital financial knowledge and practices. 

Can a 16-year-old get a credit card?

​​The only way to get a credit card for a 16-year-old is if you (as the parent or guardian) add your child to your credit card account as an authorized user/second cardholder. As an authorized user, your teen will have their own card linked to your account and be able to make purchases. You will ultimately be responsible for these purchases if they don't pay the money back.

How to become an authorized user

Adding a teen as an authorized user is a straightforward process. Simply contact your bank or card issuer. There's no legal age requirement, but card issuers have different rules and policies for adding minors, so check the small print.

What are the pros and cons of being an authorized user at 16?

Pros

  • Credit management skills such as understanding credit and balance limits, making regular payments, and understanding how annual interest rates work.
  • Financial education around spending, the value of money, and delaying gratification.
  • Access to funds in an emergency, especially if they travel without you.
  • A safe way for them to understand how credit and credit cards work before having their own card.

Cons

  • Teens are teens, and some may overspend and max out their cards no matter what you say to them. Don't underestimate how fast teens can spend and sign up for subscriptions.
  • Their spending can damage your credit rating. This is a crucial point because if spending goes unchecked, they could end up maxing out your credit and this can hurt your credit score in the future.
  • It won't build their credit history. While adding your child as an authorized user on your credit card can offer some benefits, it won't help them develop a credit history. This is because the primary cardholder is the person responsible for making repayments. 
  • A credit card enables them to shop where they want and buy items that you may consider to be a waste of money or inappropriate.

Credit card mistakes your kids should avoid

Learning how to use a credit card properly is important, and there are some pitfalls to avoid. The main things to consider when thinking about a credit card for 16-year-olds are:

  • Just paying the minimum payment - This means that interest will build up over time and it can mean that some people never pay off their credit card debt
  • Overspending - Credit cards can make it tempting to spend more than we really need to, so it's important to be wary of overspending. This can be helped by learning how to budget.
  • Paying late - Late payments usually mean fees, and this can affect your credit rating for years to come, making it harder to get any other loans such as car finance or a mortgage.
  • Credit card fraud - Using a credit card without permission is a type of fraud, and this could lead to getting prosecuted.

What are the other options for 16-year-olds? 

If the idea of a credit card doesn’t sit easily with you there are other methods that will help your child learn about money, credit, and spending, without the risks above. 

Get a prepaid debit card

A prepaid debit card, such as GoHenry, can help your teen learn about saving, budgeting, and responsible spending.

 

The pros of a prepaid debit card are that your teen can't overspend and go into debt. However, it won't teach them about credit limits and monthly payments.

 

That said, like a credit card, a prepaid GoHenry debit card can give your teen the freedom to spend online and in stores. It will also help them to track their spending in real time via the app. Plus, as a parent, you can monitor their spending, set limits for how much they can spend, and encourage them to set up saving goals.

 

For this reason, prepaid debit cards are a fantastic way to safely teach teens good financial habits. So when they are ready to get a credit card, you'll be confident that they know how to be sensible with credit and spending.

Get a debit card and bank account

If your child is above the age of 13, they can also open a bank account and get a debit card, which works very much like adult debit cards. As a parent or guardian, you have to open the account (take them with you for ID), and you also need to hold a current account with the relevant bank. Minimum ages for debit cards differ between different banks.

 

The benefit of a debit card is that it will help them to learn about money through their own experience. However, unlike a prepaid debit card, you won't be able to monitor their spending or set up spending limits. It also means they are able to buy whatever they want without the safety precautions that come with a prepaid debit card.

What's the best way to help teens understand credit? 

Credit, APRs, balances, and limits are all confusing terms for teens. For this reason, make sure you educate them on credit card basics, such as:

  • Not going over the agreed credit limit.
  • Paying their bill on time each month.
  • Getting cash out with a credit card has higher interest than using the card in a shop or online.

Also, remind them that while credit cards give you a line of credit with what's known as a credit limit (the highest amount you can borrow, this limit isn't free money. Everything they borrow has to be paid back with interest).

 

To help them get to grips with this, GoHenry's Money Missions includes bite-sized lessons designed to help teens learn about credit cards, money, and interest. It covers everything from saving and investing to responsible spending, borrowing, and more. 

 

Learn more about the GoHenry teen debit card today!

 

 

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Written by Anita Naik Published Nov 25, 2022 ● 5 min. read