Credit Cards Before 21: What's Allowed

This is one to read with a parent or guardian — if you do open a card, you'll likely need them on it.

If you're under 21 in the United States, getting your own credit card is harder than people make it sound. There are real laws about this. They were put in place to stop credit card companies from giving cards to people who couldn't afford them. This article walks through what's actually allowed, in plain English.

First, what a credit card actually is

A credit card is a card that lets you borrow money to buy things. The bank pays the store, then sends you a bill. You pay the bank back. If you don't pay the full amount, the bank charges you interest — extra money on top of what you spent. Credit card interest is high, often around 20% to 30% a year.

A credit card is not the same as a debit card. A debit card spends money you already have, sitting in your bank account. There's no borrowing. For more on this, see debit card vs credit card.

The CARD Act: the law for under-21 credit

Back in 2009, the U.S. passed a law called the Credit CARD Act. One big part of it: people under 21 cannot get a credit card on their own unless they meet at least one of these:

1. Show proof of income. You have a job and you make enough to pay the bill yourself.
2. Have a co-signer over 21. A parent or other adult signs the card with you and is responsible if you can't pay.

The Consumer Financial Protection Bureau explains why the law exists: too many young people were getting buried in credit card debt before they had any income at all.

What about being added to a parent's card?

This is the most common way teens get a credit card: as an authorized user on a parent's card. You get a card with your own name, but the account is in your parent's name. They are the one legally on the hook. This can be a good way to start building credit history — your record of borrowing and paying back — early.

Student credit cards

Some banks offer student credit cards to college students 18 to 21. Even these usually require:

• Proof of income (a part-time job, financial aid refunds, etc.), or
• A co-signer over 21

The credit limits are usually low — for example, $300 to $1,000 — to keep the risk low.

Secured credit cards

A secured credit card is one where you give the bank a deposit (for example, $200) and that becomes your credit limit. If you don't pay your bill, the bank uses your deposit. Secured cards are sometimes the only way younger people can get a card in their own name. They count toward building credit history.

Why credit history matters

Even if you have no plans to use a credit card now, your credit history matters later. Landlords, cell phone companies, and even employers sometimes look at it. Good credit can mean lower rent deposits, better car loan rates, and easier apartment applications. Bad credit costs real money for years.

The glossary entry on credit has more.

How to use a credit card without getting hurt

If you do end up with one, follow these rules:

• Pay the full balance every month. Not just the minimum. The minimum is a trap.
• Spend less than 30% of your limit. If your limit is $500, try to keep your bill under $150.
• Set up auto-pay for at least the minimum. This stops late fees if you forget.
• Check the statement every month. Watch for charges you didn't make.

Things to never do with a credit card

• Cash advances. These charge huge fees and start interest immediately.
• Lend the card to a friend. You're responsible for everything they buy.
• Pay only the minimum month after month. A $1,000 balance at 25% interest can take years to pay off.

What if you mess up

If you miss a payment, your credit score can drop a lot. A credit score is a number from about 300 to 850 that summarizes your credit history. The Consumer Financial Protection Bureau has free guides on what to do if you fall behind. Tell a parent fast — credit problems get worse the longer you wait.

If a credit card company is treating you unfairly, you can file a complaint with the CFPB.

Words to know

• Credit card — a card that lets you borrow money to buy things
• Debit card — a card that spends money already in your account
• Interest — extra money you pay on top of what you borrowed
• Balance — the amount you owe right now
• Credit limit — the most you're allowed to borrow on the card
• Credit score — a number that summarizes your credit history
• Authorized user — someone added to another person's credit card
• Co-signer — an adult who promises to pay if you can't

For more like this, head to the Learn hub or the glossary.

If you're not sure about anything in this article, ask a trusted adult — that's what they're there for.