Should a 16 year old have a Credit Card?

As a parent, you want your teen to be financially responsible and to learn money management while you are close by to protect him.

On the other hand, having your teen asking how to obtain a credit card is frightening for many parents. Why would a 16 year old want a credit card? Because he wants to buy stuff.

He wants the ability to buy what he wants without having to save up or plan for it. Or perhaps, she wants to be able to make purchases as she checks out the mall with her friends.

Growing Up in a Plastic Culture

Perhaps we shouldn’t be surprised to hear a teenager demanding a credit card. How many times has that teen watched as his parents flipped out a plastic card to pay for clothing in the department store?

The teen’s parents belong to a generation where credit card use was commonly accepted yet the plastic cards were used most often for special purposes.

Shopping for school clothes or big sales events were great times to spread out payments through credit card use.

The parents of the teenager watched their own parents use credit cards in a thoughtful way. Consideration was given as to whether an item should be “put on the card” or not.

We’ve evolved into a society where the plastic card is now the first choice of payment method. It’s dangerous to carry large amount of cash and personal checks have been largely replaced by debit cards (more plastic).

When your son or daughter says “I’m 16 – when can I get a credit card”, he’s asking “when can I be a grownup?”

For years he’s tagged along and watched as you made impulse buys, pull out a credit card to pay for groceries or a $10 lunch. To him, credit cards are not a privilege but a rite of passage.

At 16, he feels he’s growing up and needs grown-up tools. That’s what credit cards represent to teens today. The ability to buy now and pay later was once a luxury and now is seen as a necessity and a way of life.

How Soon Can a Teenager Obtain Credit?

Until recently, young people entering college could get a credit card in their name with no co-signer and with no proof of income. This was a method used by big banks to increase the user base of their credit cars.

It was assumed that college students would have the earning power in the future to pay credit card bills. Lenders believed attracting youth to their branded card might ensure lifetime customers.

A few years ago, even high school students could occasionally get cards in their name though most did need a parent’s signature as permission.

Student Debt Crisis

The unregulated granting of new credit accounts to teens that had no ability to pay the monthly amounts due on their debt led to an increasing number of high school and college students with debt problems.

Students were entering a work force where checking applicant’s credit file is a common part of the hiring process. It was easy to explain why a young person did not yet have a credit rating or file but not easy to explain why an 18 year old had bad credit.

Young people had been granted credit lines that allowed them to buy now and pay later but it was clear they had no income to make payments with.

Many high school and college students ran their credit cards quickly up to the spending limit and then moved on to something else assuming nothing bad would happen.

The credit limits on these student cards were very low ($300-1000) so the lenders were not taking big risks.

The risk was to the young people as the $300 of impulse buys they made and didn’t pay for damaged their credit for years to come.

Co-Signer Required

If you are faced with the question “I’m 16 and I want to know how to obtain my first credit card”, you may choose to fill out an application with your teen so you can teach good financial management.

You will need to be the co-signer and will be responsible for the payments on that account if your teen fails to make them. If the account goes into default, it will affect your credit as well as his (not possible with prepaid cards).

The age to begin using credit is a flexible personal number. Some students are ready at 16 to use a credit card wisely. Some will need close guidance and oversight by parents to avoid running themselves into debt.