MONEY AND LIFE

Should Teens Have Credit Cards?

By: Keith Wagstaff · July 26, 2024 · Reading Time: 2 minutes

The number of young adults with credit cards has skyrocketed over the last decade.

Back in 2013, among those with active credit, only 61% of people ages 22 to 24 had a credit card. In 2023, that percentage jumped to 84%, according to a report from credit bureau TransUnion.

Gen Z, the youngest of which are still in high school, are more likely to have a credit card than Millennials were at their age. This also means that this generation got a headstart on building credit. The Wall Street Journal reports that some teens were excited about this very part of having their own card. For one interviewee, who got their card at 16, it translated to a credit score above 700 by the age of 21.

Parents who want their kids to be able to finance a car or rent an apartment after graduating college might be tempted to hand their kid a credit card. But is that always a good idea?

Benefits of Getting a Card

Building good credit is important for your financial wellness, whether you’re a teen or not. A good credit score makes it easier to get a personal loan, buy a house or car, qualify for lower insurance premiums, and much more. Giving a teenager a head start when it comes to building credit can make their life easier and give them more independence down the road.

Getting a credit card early on can also help improve financial literacy. With parents as a safety net, younger people can learn the importance of making payments on time and not spending beyond their means.

Potential Pitfalls

Of course, there are also some risks. Teenagers may be more impulsive than adults and could spend irresponsibly. If parents let their kids spend without consequences, valuable lessons may not be learned.

The TransUnion report found that, even adjusting for inflation, Gen Z has higher debt-to-income ratios than Millennials did at their age. Young people today face rising prices, higher interest rates, and constant temptation to FOMO spend thanks to social media and targeted advertising.

The bottom line: Parents need to teach their kids good habits so they don’t find themselves buried in debt as they grow older.

How Can Teens Get a Credit Card

First things first, minors can’t get a credit card on their own. Even at 18 years old, young people need to prove they have an income or get a cosigner older than 21 to be issued one.

But parents can add kids 16 and older to their accounts as authorized users. When they do, the teen gets their own card with their name on it and can use it however they want, leaving the parents legally responsible for paying the bill.

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