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This offer is no longer available on our site: The Amex EveryDay® Credit Card from American Express
People under 21 can legally open a line of credit, but probably not on their own. Your child will likely need a co-signer or proof of income to open a credit card if they’re under 21.
If your child earns an income from a job, he may be able to apply and qualify on his own. If not, you may need to co-sign his first card.
Another option is to add your child as an authorized user to one of your existing credit cards. Or you could open a new card that you want to provide for your teen, and add him as an authorized user to the account.
Will sharing a credit card with my teen affect my credit?
Whether you co-sign a credit card with your teen or add him as an authorized user, how your teen uses the card can affect your credit as well. If you have a good credit history and offer yourself as a co-signer when your teen applies for a card, the lender may be more willing to approve the application – but you will be responsible for the credit card balance if your teen cannot pay. If your teen is added as an authorized user, he can use your credit card account but ultimately is not responsible for paying the bill.
A third option is to open a secured card. Secured cards require you to make a security deposit, which then usually acts as your initial credit limit. Just make sure the card issuer will report the activity from the card to credit bureaus, so your child can start building a positive credit history.
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This card might be a good card for you to open and add your teen as an authorized user, as there’s no annual fee and no fee for added cards.
The card also offers an intro 0% APR for the first 15 months on purchases and balance transfers (requested within the first 60 days of account opening). After that, your APR will be a variable rate, currently 15.24% to 26.24%, based on your creditworthiness and other factors.
This card can be a good option for teens thanks to its lack of an annual fee and foreign transaction fees. The card was designed for students, making it easier for those with little to no credit history who want to build their report and score to get approved.
That should help teens get their own card even without a credit history. But people under 21 who don’t have their own income will likely still need a co-signer, or they’ll need someone else to apply for the card and then add them as an authorized user.
This is a secured credit card that allows users to build credit while preventing them from spending more than they can afford, since it usually comes with lower credit limits and requires a security deposit in order to make charges. There’s no annual fee, and it’s one of the few secured cards that allows you to earn cash back rewards for spending.
How to choose credit cards for teens
1. Prepare your teen for a credit card first
You can’t expect your teen to make smart decisions with credit if they don’t understand how it works. Cristina Guglielmetti, CFP® and president of Future Perfect Planning, suggests ensuring that you’ve covered the basics of credit cards.
That includes going over topics like the ones below:
- How credit works and why it’s different from cash.
- What interest charges are and how they accumulate.
- What happens when you charge money to your credit card that you don’t repay.
- Due dates and penalties for late payments.
- Who is responsible for paying the bill and how to do it.
- Any spending limits, in terms of dollar amounts or categories of spending.
- The risks of using credit cards.
“Talk about the factors of a credit score and how credit utilization and on-time payments are very important ones,” adds Erin Lowry, author of “Broke Millennial: Stop Scraping By and Get Your Financial Life Together”.
Communication is key if you’re looking at credit cards for teens. Encourage questions and walk through the answers in as much detail as possible. There should be several conversations that take place before your child ever receives access to credit on his own.
2. Be honest: Are they ready for credit?
As the experienced adult, you need to look at the situation realistically: Is your teen capable of handling his or her own line of credit?
Lowry suggests giving your kid financial training wheels in the shape of a debit card or prepaid card, along with a budget. Then see if your teen can consistently stick to his budget and stay within a spending limit when using plastic instead of cash.
If your teen fails to do so, you might have him help pay for fees or interest charges to show his actions do have financial consequences, while still allowing him to practice and learn.
Guglielmetti adds that financial help extended to teens — be it cash or credit — should be looked at as “practice money.”
“You can’t really expect an 18-year-old to suddenly have good money-management skills without having had anything to try before,” she says.
But if teens continually fail to follow the rules and show they can’t manage their spending and bills, go back to the financial basics until they’re better prepared to take on the responsibility of credit.
3. Review card options carefully
Once you determine that a credit card is an appropriate option, you’ll need to determine which card is best for your child. Here are a few things to look for when choosing credit cards for teens.
- Fees: Look for cards with no annual fees. Review each credit card’s terms and conditions to get a complete list of all fees and interest charges. If you’re tempted by a card with an annual fee, calculate how much you’d need to spend in a year to make the fee worthwhile.
- APR: Mistakes happen, which means your teen might carry a balance now and then. Look for a credit card with a low APR so mistakes aren’t as costly in terms of added interest.
- No frills: You don’t need to worry about rewards when looking for credit cards just for your teen. The ability to earn rewards could encourage overspending and make it harder for kids to stick to their spending limit.
Lowry advises parents to explain to teens that despite how much they could spend, they should keep their revolving balance to 30% of the card’s limit at most.
Your teen will likely need your help in order to open their first credit card under the age of 21.
It’s up to you as the adult to lead open conversations about finance and work with your child to ensure he or she understands the basics of credit, how to use a credit card, stick to a budget, and pay the statements in full and on time.