Fundamentals of Credit Card Usage for High School Pupils
Credit scores play a significant role in loan decisions and can impact various aspects of one's life, including living arrangements, employment, and insurance. For high school students, establishing good credit early offers financial advantages such as lower interest rates and better terms on loans. Here are some key options for building credit without traditional credit cards.
Becoming an Authorized User
One way for students to build credit is by becoming an authorized user on a family member's credit card. This allows them to benefit from the account's payment history without needing to qualify for a card themselves. However, it's essential that the primary cardholder manages payments responsibly to avoid any negative impact on the student's credit score.
Secured Credit Cards
Secured credit cards are another option for students. These cards require a cash deposit that sets the credit limit, minimizing risk. Students prepay a certain amount, and the card reports responsible usage to credit bureaus. Examples of secured credit cards that don't require a credit check include the Capital One Platinum Secured Credit Card and Varo Believe Secured Credit Card.
Alternative Credit-Building Products
There are also alternative credit-building cards/products like the Current Build Card and Chime Secured Credit Builder Visa® Card. These cards don't allow carrying a balance or incur interest, and they report to all three major credit bureaus, establishing credit without the risks of traditional credit cards.
These approaches allow high school students to start building their credit history responsibly without the full exposure or requirements of a traditional credit card, often requiring parental support or secured deposits.
It's important to note that federal law restricts credit extension to young people to prevent them from incurring debts they can't repay. Applicants under 21 need an independent income or a co-signer to qualify for a credit card.
To maintain good credit, it's crucial to make at least the minimum payment by the due date every single month and to avoid carrying a balance, especially if using more than 30% of your available credit. Additionally, setting a calendar reminder to review your statement weekly can help spot fraudulent charges.
[1] Source: Consumer Reports [2] Source: Forbes [3] Source: NerdWallet [5] Source: Federal Trade Commission
- By becoming an authorized user on a family member's credit card, high school students can leverage the account's payment history to build their own credit without the need for a traditional credit card.
- For those who prefer a secured option, secured credit cards like the Capital One Platinum Secured Credit Card or Varo Believe Secured Credit Card can help students establish credit by requiring a cash deposit to set the credit limit.
- For those seeking alternative ways to build credit, consider cards/products such as the Current Build Card and Chime Secured Credit Builder Visa® Card, which don't allow carrying a balance or incur interest, and report to all three major credit bureaus.
- To maintain a good credit score, students should always pay at least the minimum payment by the due date each month, avoid carrying a balance, especially if using more than 30% of their available credit, and regularly review their credit card statement for any potential fraudulent charges.
- Federal law restricts credit extension to young people to prevent them from taking on excessive debt, requiring independent income or a co-signer to qualify for a credit card if under the age of 21.
