A good credit score is important if you ever want to rent an apartment, buy a house or car, get auto insurance, or even purchase a cell phone. At 16, most of these major life steps might seem far away, but it’s never too early to start practicing good credit habits.
Using a credit card is one of the easiest ways to start building credit, because they're relatively easy to get approved for. There are even some options for getting authorized on a credit card at 16, with help from a parent or another adult.
- A 16-year-old can get authorized on a credit card with help from a parent or another adult, but cannot get a credit card on their own.
- In most states, you cannot get a credit card on your own until you are 18.
- Teens can use other payment options like prepaid cards, debit cards, or cash apps to make purchases if they don’t want to use cash.
Can 16-Year-Olds Get a Credit Card?
Since the legal age to accept a credit card agreement is 18 in most states, you won't be able to get your own credit card at age 16.
Once you turn 18, you can get a credit card on your own, but there are some caveats. Credit card issuers will have to make sure you have enough income to make a credit card payment each month. You can still get a credit card if you don't have a job or you don't make enough, but you'll need someone over age 21 to apply with you.
You don't have to wait until age 18 to get experience using credit cards. There are some options for getting a credit card at age 16 if an adult parent, relative, or friend is willing to help.
How Authorized Users Work
You can be an authorized user on someone else's credit card, like a parent, usually by the time you are 15 or 16, depending on the credit card issuer’s terms. As an authorized user, you can make purchases on the credit card, but you're not legally responsible for making payments. You'll get a credit card with your name on it, but you'll share the credit limit with the account owner.
What Can Authorized Users Do
As an authorized user, you'll share some privileges with the primary cardholder, but some credit card features won't be available.
For example, you'll be able to make purchases and payments, check the balance, report a lost or stolen credit card, submit billing disputes, and remove yourself from the account. You won't be able to request credit limit increases, add another authorized user, request a lower APR, or close the account.
How to Get Added
Any adult can make another person an authorized user on an existing account or add you to a new account. It can be a relative, friend, or another adult who approves of adding you to their account. The account owner can add you to the credit card by logging into their online account, through the mobile app, or by calling the credit card issuer. They'll need to give the credit card issuer your name, date of birth, and Social Security number to finalize the request.
Credit card issuers don’t require credit checks for adding authorized users. That means, the authorized user’s credit score will not be affected.
Credit Score Benefits
Being an authorized user can help you establish good habits with using a credit card, but that's not the only benefit. You can also jump-start your credit history. The account history is added to your credit report and reported monthly, which can establish and boost your credit if the account history is positive.
Consequences of Overspending
It's important not to charge too much on the card you're using. Your credit score is partly based on how much credit you're using, and higher balances can cause your credit score to drop.
Maintaining a low balance is also important for maintaining a healthy financial situation, with monthly payments you can afford. Charging too much could make it difficult to keep up with your payments and paying late means you'll be charged a fee. Payments that are late by more than 30 days are usually noted on your credit report and may impact your credit score.
Some credit card issuers may restrict the types of cards you can be added to. For example, you may not have an option for an authorized user on college credit cards, secured credit cards, or cards with a co-signer.
Other Payments Options for 16-Year-Olds
As an alternative to credit cards, there are other payment options for 16-year-olds who may not have someone who can make them an authorized user.
A prepaid card allows you to spend money that you've loaded, or prepaid, to the card. Your purchases are deducted from your card balance and there's no credit check or monthly payment requirements. You can purchase and reload a card at many retail locations like CVS, Walgreens, and Walmart.
The biggest thing to watch out for are fees, which can slowly chip away at your balance. Common fees with prepaid cards include monthly fees, transaction fees, reload fees, and paper statement fees.
A debit card is similar to a prepaid card, except that it's linked to a checking account. Debit card purchases are deducted from your checking account balance. Unless you opt-out, purchases that exceed your available balance may trigger an overdraft fee. At age 16, you'll need your parent to open an account with you.
Payment apps allow you to send (and receive) money to friends and some businesses using a linked account—a checking account, debit card, or credit card. You have to be at least 18—or the age of majority in your state—to open your own account with apps like Cash App, PayPal, and Venmo. A parent may be willing to open an account for you if you share a bank account, but the actual payment app account won't be in your name.
Apple Pay is a more flexible option for sharing a payment app within families with iPhones, iPads, or Apple Watches. Once a parent adds you to Family Sharing, you can use the app to send money or make purchases at participating stores.
The Bottom Line
Getting a credit card at 16 is possible, but you'll need a parent or another adult to apply with you or to make you an authorized user on one of their credit cards. Teenagers who want to make purchases or build their credit have several choices in alternatives to credit cards.
Frequently Asked Questions (FAQs)
What is a good APR for a credit card?
When it comes to APRs, the lower the better. The average APR was 20.25% as of July 2021, according to data collected by The Balance. APRs can vary depending on the type of credit card. For instance, the average APR on a student credit card is lower than that of a cash-back rewards card.
How can you use a credit card to build good credit?
Keeping your balance low and making your monthly payments on time are the two main things you can do to build good credit. Together, these two factors make up more than half of your credit score. Leaving your account open longer also helps establish a longer credit history, which builds good credit as you gain more experience using credit.
What is the difference between a charge card and a credit card?
With a credit card, you have the option of paying your balance off over time as long as you make the minimum monthly payment. A charge card, on the other hand, requires full payment each month to keep your account in good standing and for you to avoid hefty interest charges. Credit cards have a firm credit limit, while charge cards don't have a preset spending limit.