According to the Federal Reserve’s research, 84% of adult Americans have credit cards, with 73% taking them out by age 25. This makes credit cards the most popular financial product among young adults.
If you’re approaching adulthood, you may want to join the crowd and get a head start by taking out a credit card early. To show you if this is possible, this guide will answer a common question among teens—can you get a credit card at 16? You’ll learn about your options and credit card requirements, as well as some ways to get around the limitations you may face.
Can 16-Year-Olds Get Credit Cards?
Regardless of their age, minors are legally prohibited from owning a credit card solely in their name. You must be at least 18 to apply for one, or older if the legal threshold in your state is higher. Even then, you might have to meet additional requirements before a bank is willing to issue you a card.
This is because of the strict regulations imposed by the CARD Act of 2009. The Act doesn’t allow anyone under 21 to own a credit card unless they can make repayments independently. You must prove that you have a stable income allowing you to meet your obligations to the lender.
If you don’t meet this requirement, you need a co-signer over 21 who will share ownership of the account with you. The problem is that most banks don’t offer co-signers on credit cards, so you most likely won’t qualify for a card before reaching legal age and having a stable job. This goes for all traditional credit cards, so you’ll have to wait at least a couple more years to get one.
Can You Get a Secured Credit Card at 16?
Source: RODNAE Productions
Secured credit cards work similarly to the more common unsecured credit card options, except they’re easier to obtain. You pay a deposit that typically serves as your credit limit, so the lender doesn’t face as big of a risk of non-payment. That’s why some young adults start with secured cards before obtaining an unsecured one.
Unfortunately, this option isn’t accessible to minors either. You must be of legal age in your state to apply for a secured card, so 16-year-olds can’t own one.
With all of the above in mind, we can conclude that you can’t get any credit card at 16 independently. The primary way for a minor to gain access to a credit card is by becoming an authorized user of an adult’s card.
How Can Someone Add You to Their Credit Card?
Until you’re eligible for a credit card in your name, a parent or legal guardian can add you to theirs as an authorized user. You’ll get access to their credit account and most likely get a separate card connected to it. This way, you can use credit funds as if you owned the account.
Becoming an authorized user is straightforward—all your parent has to do is contact their bank and request to add you. The bank will need your personal information, such as:
- Full name
- Social Security number (SSN)
Depending on the bank, you’ll either have full access to the credit card or your parent will set a limit. All funds you use will need to be repaid, so you and your parent can decide how you’ll make payments.
Downsides of Credit Card Authorization
While being an authorized user seems convenient, some parents are hesitant to add their children because of the risks associated with doing so. Many are afraid their children will overspend and use the card without their permission, which can lead to significant debt.
Only the primary holder is responsible for the debt, so your parent might be hesitant to expose themselves to such risks unless you have sufficient financial knowledge and show responsibility.
Another downside affecting both card users relates to credit building. While you don’t need a credit check to be an authorized user, you’ll need one to get an independent credit card and other loans. Good credit can help you get loans on favorable terms and affect other areas of your life, like renting an apartment or getting a job.
Being an authorized user isn’t the best way to build credit for several reasons:
- Some banks don’t report authorized users’ activity to the credit bureau
- You inherit your parent’s credit history, which can be a problem if they have a history of defaults or other issues
- Your credit profile is connected to your parent’s, so poor credit behavior on any user’s part can hurt both scores
- When your parent removes you from their card, your credit history associated with it gets deleted from your profile, so you need to start over
Credit Card Alternatives for Teens
Source: Andrea Piacquadio
If you only need a credit card to avoid cash and enjoy more independence, you have two primary alternatives:
A checking account lets you receive money from your parents, employers, and anyone else. You’ll get a debit card connected to it, which you can use for payments, withdrawals, and other uses.
You don’t need to be a legal adult to get a checking account, but you may need a parent or legal guardian present to open it. Most banks also require the parent to be a co-signer, so you’ll have a joint account until you’re old enough for your own.
Unlike debit cards, prepaid cards aren’t connected to a bank account. Your parent loads it with funds, and you can use the card as a standard debit option. You may not be able to receive payments from third parties unless the card issuer allows it.
Debit and prepaid cards are solid options to get you started using purchasing cards—you’re learning how to manage spending with a card using your own funds, not borrowed. The main downside is that such cards don’t help you build credit, as your use of them isn’t reported to the credit bureau.
So far, minors’ options for building credit have been limited to ineffective methods like being authorized users on an adult’s card. Luckily, parents now have a better way of supporting their children’s financial independence—FreeKick.
FreeKick—Parent-Sponsored Credit Building for Minors and Young Adults
FreeKick combines a Federal Deposit Insurance Corporation-insured (FDIC-insured) deposit account and additional services to help parents establish and build credit for their children.
The product was created by Austin Capital Bank and lets parents get started in three easy steps:
- Make a Deposit—Create an account by choosing a plan based on the one-time FDIC-insured deposit
- Set It and Forget It—When the parent opens the account, the child automatically builds credit for the next 12 months
- Keep Growing—The parent can renew the account after 12 months and keep building their child’s credit or cancel it and have their deposit back
FreeKick offers three simple plans without cumbersome monthly subscriptions:
- Free—One-time deposit of $2,500
- $49/year—One-time deposit of $1,750
- $99/year—One-time deposit of $1,000
When the account is active, FreeKick will:
- Start building the child’s credit
- Monitor their credit profile to keep their information safe
Can You Build Your Credit at 16 With FreeKick?
FreeKick builds credit for minors and young adults by creating a payment history and reporting it to the three major consumer credit bureaus. The only difference between age categories lies in the point at which credit can be reported, as explained in this table:
|Age Category||Credit Reporting|
|Young adults (18 or over in most states)||FreeKick reports the user’s credit history immediately|
|Minors (typically 14–17)||The child builds credit and payment history as a minor, which is reported when they become an adult and activate credit reporting|
Each 12-month cycle boosts the child’s credit profile, giving them a significant advantage later in life. Good credit can save children over $200,000 throughout adulthood!
The parent can close the account at any point. If they do so while their child is still a minor, no credit reporting can be done for the account.
FreeKick’s Credit Monitoring
Identity fraud is a rising concern in our payment system, and children are among the most common victims. Financial criminals steal or buy minors’ SSNs or other private information to forge fake identities and take out credit, which is known as synthetic identity fraud.
To give parents and their children peace of mind, FreeKick checks the child’s credit profile during account opening to identify indicators of identity fraud.
To safeguard your child’s private information and help them reap the many benefits of a strong credit profile, sign up for FreeKick.
Featured image source: Kindel Media