Reaching 18 opens up many new doors and opportunities – and many people coming of age in the US will likely want to start taking better charge of their financial habits, or at least more freedom! Luckily, the best credit cards for 18 year olds enable young people to make sensible purchases and learn how to budget responsibly.
In this guide, I’ll take you through what you need to know about applying for a credit card as an 18 year old, and why doing so may or may not be the right idea for you. Before you go ahead and apply for that appealing 0% interest deal – read everything I have to say below.
What is the best credit card for a teenager?
It’s easy to assume that the best credit cards for 18 year olds come with flashy deals and tons of added benefits. While low interest rates and money off deals are great in themselves, you’ll need to look for a few other attributes when comparing different options.
Ideally, the best credit card for a young adult should help them build healthy financial habits. Paying off credit card debts can get difficult if you allow them to spiral. Therefore, a card set up with clear limits, boundaries, and with plenty of advice available should be immensely helpful.
Of course, everyone’s needs are different, and it may be that a credit card simply isn’t right for you at this time. I’ll address potential drawbacks to this type of borrowing a little further down, but for now, let’s focus on what you need to look for when researching card deals.
What should an 18 year old look out for in a credit card?
Try not to get swept away by exciting deals. Always read the fine print, and keep the following in mind when comparing rates.
Interest rates you can manage
Credit card providers make money from interest – in that they’ll apply an annual rate to how much you choose to pay back each month.
Lenders will expect you to pay either a set sum or a percentage of what you owe on any debt you accrue via card monthly. That means, while it may seem cheaper to split your debts over several months, you may – bizarrely – end up paying more in interest over time.
Therefore, the first factor you should always consider when comparing young adult credit cards is interest rates. Don’t be too tempted by “0%” deals, either, as these deals will expire after specific periods. You’ll need to clear your debts by the time it expires, or you’ll often have to pay high rates afterwards.
Provided you’re sensible about paying back your debt and don’t let interest build up, spending on a credit card can still be highly freeing.
Most credit cards will arrive with limits set for you based on your credit score. As a young person, you may not have much of a history to prove just yet. Therefore, it’s reasonable to expect 18 year old card holders to have lower limits than most.
However, this really isn’t a bad thing. Credit limits will restrict your monthly spending, but providing you keep a close eye on your finances, you’ll gain a greater appreciation for lowering and managing spending over time.
High limits aren’t always worth investing in unless you’re absolutely certain you can pay back your debt each month.
Credit card issuers each have different qualification demands when you first apply. As mentioned, you likely won’t have much of a history lenders can judge you on at 18, which means you may have to pay a security deposit.
However, look for cards specifically designed with students in mind. Under-21s will find there are several providers willing to offer you cards providing you have provable income to cover costs.
Alternatively, an easy (but expensive) way to qualify for a young adult’s credit card is to pay a security deposit. This will “sweeten the deal” with some lenders, who will feel more confident in providing you with disposable credit.
The best credit cards for 18 year olds may even offer a variety of different options when first registering. As always, read the registration demands carefully, and don’t sign anything until you understand what’s expected of you.
What are the benefits of getting a credit card at 18?
Some young people may feel that getting a credit card is a fairly large step to take. They’re absolutely right – but at the same time, taking out this type of finance may actually be beneficial for you depending on your circumstances. Let’s take a look.
It can help build your credit
One of the biggest catch-22s of modern life is that to get credit, you need credit history. Unfortunately, walking up to a mortgage lender at 25 with no prior history will likely result in higher premiums, and possibly even rejection.
I’m not suggesting you need to get a credit card to build your score, but if you manage your finances wisely, it can be an asset. Provided you pay your monthly credit card debts within the expectations of your lender, your score will show you’re reliable at paying money back.
If you’re not yet acquainted with how your credit score works, check out our guide linked.
It’ll help you gain financial independence
For many people, turning 18 is an opportunity to start gaining independence from their parents in various ways. Getting a credit card can seem rebellious in a lot of ways, but in a positive light, it can be a good first step toward financial autonomy.
Managing your own credit card means you will need to build budgeting skills to keep paying debts. Most issuers provide apps and online services to help you manage payments and transfers, too.
Therefore, you have a wealth of information there for the taking. Having your own card means you get a complete say over what you pay for. However, you are also completely responsible if you miss payments, or if you exceed any credit limits.
You could claim benefits for using a card
In some cases, young adult credit cards may help you earn rewards and money off on various products and services. You could claim cashback for shopping, or even earn money towards travel and vacations.
However, I’d never advise you to apply for a credit card just because of the “freebies” on offer. Always check what a lender expects from you. It’s cliche to say “what’s the catch” – but there will always be some take with every little give.
Are there any drawbacks to getting a credit card at 18?
The largest drawback to taking out a credit card at 18 is, of course, that you’re spending money that isn’t there. This is money you’ll need to pay back when your lender expects you to – and if you don’t, there may be harsh consequences.
This kind of pressure may feel too heavy for some people at 18. Some go through life never getting credit cards at all, as they are comfortable paying from money they can debit.
Getting a credit card at 18 could seriously damage your score if you act recklessly. While we all make mistakes when we’re young, using a credit card carelessly could affect your chances of buying property or investing in vehicles in years to come.
This isn’t meant to be a “horror story” about the pitfalls of credit cards – it’s simply worth knowing the potential risks.
Will the best credit cards for 18 year olds help improve your credit score?
Hypothetically, yes, credit cards can help to establish a healthy credit history from any age. However, there are other routes you can take if you’re unsure.
A great way to try and build credit otherwise is to simply ask a parent or guardian to open a checking account for you before you turn 18. It’s a good way to start budgeting before you run your own credit, and it may help establish your financial history.
Alternatively, some card issuers even allow users to add children to their accounts as “secondaries.” Before you turn 18, you may benefit from having a profile on a parent or guardian’s card which, again, may show lenders that you are reliable and can budget, even from a young age.
Is a credit card a good idea if you have no credit?
It’s certainly not a bad idea, but you’ll need to start learning how to manage finances appropriately if you want to apply.
Failure to pay back your credit card debts may lead to legal action, which may include repossession of your assets to pay towards debts. As debts continue to go unpaid, too, interest may compound over time – meaning the amount you owe back simply grows higher and higher.
Credit is a complex affair no matter how old you are, and no matter where you live.
by Jon Craig
I am the creator of Project Financially Free and I started this journey to both educate myself and share my insights on personal finance. I’m passionate about financial literacy and I invite you to join me on this transformative path. See more.