What is the Minimum Age for a Credit Card Account?
Reader question: "I just turned eighteen, and I'm thinking about signing up for my first credit card. What is the minimum age requirement for a credit card account these days? How old do I have to be to open up my first account?"
Let's start with the short answer. Then we get into the details after that. If you want to open an account in your name (meaning you are the one entering into the contract), you must be a legal adult 18 or older. Additional rules may apply if you are between the ages of 18 and 21 years old. We will discuss these additional rules later.
That's the gist of it. Here are some more details about the minimum age requirement for credit cards. This information was last updated in June 2011.
New Laws for Minimum Credit Card Age
In 2010, some new laws were implemented to improve the oversight and regulation of the credit card industry. These laws were designed to curb a wide variety of abusive practices made by these companies. One of the changes had to do with the minimum age of card applicants. Here's how old you need to be in order to open your own account:
Applicants who are younger than 21 years of age will need to have a co-signer (who is older than 21) when opening a credit card account. Applicants can get around this requirement if they document their financial ability to repay the new debts resulting from credit card usage. One of these requirements must be met before any new credit can be granted.
Applicants who are 21 years of age or older can open an account without jumping through these extra "hoops."
If you want to research these requirements in more depth, you can do so by reading the applicable section of the "Credit Card Accountability Responsibility and Disclosure Act of 2009." You'll find information about minimum age requirements in Section 301, which is entitled "Extension of Credit to Underage Consumers."
Section 301 basically states the same thing we discussed above, but with more legalese. It says that any consumer under the age of 21 must meet one of two requirements before opening a credit card account:
- The application must include the signature of a co-signer. This person shares the responsibility for repaying any debs associated with use of the card, until the primary applicant reaches the age of 21 years old. There's an alternative to this requirement:
- Applicants do not need a co-signer if they can document their financial ability to repay any debts resulting from credit usage. This documentation would normally include proof of income in some form, such as pay stubs.
Within the context of this article, a "co-signer" can be a parent, legal guardian or spouse. The co-signer must be 21 years of age or older, and must also have the financial means to repay debts resulting from credit usage.
For your convenience, I've taken a screenshot of Section 301. Here's the part that defines an "underage consumer," and that rules that apply to such consumers:
You Have Other Options
Young people who are considering their first credit card should know there are other options available. If you do not meet the minimum age required for a credit card (or even if you do), consider the following strategies:
1. The Authorized User Strategy
Your parents could set you up as an authorized user on one of their credit cards. This would give you the ability to make charges on the card, but without the legal responsibility of repaying the debt. The card remains in the parents' names only. This can be a useful strategy for consumers who do not meet the minimum age requirements we discussed earlier.
This kind of "piggyback" strategy has an added benefit. Financial activity associated with the card will show up in the parents' names, as well as the underage user's name. So it helps the younger consumer establish a credit history -- and ideally a good one. This can pave the way to a good FICO credit score down the road, as long as the bills are paid on time. And a good score can help you obtain other types of financing, such as auto and mortgage loans.
2. The Secured Credit Card Strategy
If you don't meet the minimum age for a regular credit account, you could also sign up for a secured credit card. This is where you make an initial deposit that serves as collateral. You would then be given a line of credit up to a certain amount. This is another way to establish a positive credit history, as long as all debts are repaid on time.
Just watch out for excessive fees and higher interest rates. People who apply for this type of card usually do so because they can't qualify for a regular card. And creditors know this. So they often charge higher rates and fees. Read the fine print, and know what you're getting yourself into.
If you make all of your payments on time (and those payments get reported to the credit-reporting bureaus), you will build up a positive history. This will help you qualify for a regular / unsecured credit card later on.
I hope this answers your questions about minimum age for credit card use. If you want to learn more about the new laws that were implemented in 2010, I suggest you do a Google search for the "Credit Card Act of 2011." You can find the full text of this document online. You can even download it in PDF format, if you want. Section 301 is the part that outlines the rules we talked about in this article.