Credit Cards for Teens – Should You Get A Credit Card At 18?

Getting your first credit card can feel like one of those coming of age moments. At 18, you’re able to open your own bank account and get lines of credit, and you’ve never felt more grown up. Before you start mindlessly applying and swiping, take some time to educate yourself about your options and how credit works. 

Important Facts About Credit Cards

For the calculable user, a credit card is a great finance tool. They offer fraud protection and rewards and help improve your credit. If you find yourself in an emergency, a credit card can save the day. As alluring as they sound, knowing how to responsibly use a credit card is most important. 

Using your card frivolously can bring on a heap of debt with no end in sight. 

Understand How Credit is Calculated

Below we broke down the five categories of how your credit score is calculated.

  1. 35% – Payment history 
  2. 30% – Credit utilization (Debts owed vs. Total Available Credit)
  3. 15% – Length of credit history 
  4. 10% – Credit mix 
  5. 10% – New credit

Start With One Line of Credit

A line of credit is a loan you can pull from in increments and only pay interest on what you borrow. As you pay back what you borrow, you’re able to pull from the line of credit again. Assuming you’re in good standing with loan terms and making timely payments and that your draw period hasn’t ended.

You Might Have to Get a Secured Card

If you have bad or no credit, a secured credit card might be a good option to help you improve your credit score. 

A secured card works just like a regular credit card except you’re required to put down a cash deposit, usually equal to the credit limit. This is to reduce the risk that a creditor takes by lending to you. If you don’t pay off your credit card, they’ll use your deposit to pay it off. If you decide to close your secured credit card account or upgrade to an unsecured card, you’ll get your deposit back. 

Never Max Out Your Card

Stick to your budget and only borrow what you can afford to pay off in a timely manner. Maxing out your credit card increases your credit utilization, which is the second largest contributor to your credit score. If you max out your credit card, chances are that you’ll go over the limit with interests being added on. 

Your Credit Score Can Open Doors

Having a high credit score increases your odds for mortgages or being approved for a new apartment rental. More lenders will trust you to pay back borrowed money when you have a better credit rating. Not to mention, you’ll get better interest rates on credit cards, leased or bought vehicles and student loans. 

Some employers are running credit checks to see how their prospective employees would fare when handling company finances. 

Building Credit Takes Time – Credit Score Drops Can Happen Instantly

Improving or rebuilding your credit takes time and effort. You must prioritize on-time payments, paying more than the minimum, and spending wisely. Try setting up automatic payments and reminders to keep you on track. If you do all of these things, your credit can improve, however, one late or missed payment can drop your credit score up to 100 points almost instantly! 

What To Look For In a Credit Credit Card

When applying for a credit card, you’ll need look for a few keys factors such as:

  • Zero Interest Period: Many credit cards offer an introductory 0% interest rate for a certain period of time. Shop around and see what’s being offered. Read the fine print so you know what happens AFTER the intro period too.
  • Rewards: Some cards offer airline frequent flyer rewards, hotel discounts and no annual fees. Look for a card that best suits your needs. 
  • Cash Back: Charges like grocery shopping, gas stations and online shopping often earn you cash back points. Use the card like cash and pay it back in full as soon as the bill is due — you’ll bypass interest charges and get paid for using it!
  • Credit Tips: Credit score monitoring and tips often come with your account. These services are helpful when improving your credit score and tracking your progress. Often, they will allow you to check your credit score at any time.  

Credit Card Alternatives for Teens

Having trouble getting a line of credit or worried about going into debt? 

A Credit Builder Loan from MoneyLion offers competitive rates, helps you build credit and requires no credit check. To apply for a Credit Builder Loan, you’ll need to sign up for a Credit Builder Plus membership. 

From there you’ll need to link your checking account and MoneyLion will scan your account for a few determining factors like: active account for at least 60 days, detectable income and acceptable account balance within good standing. 

If you’ve been approved, you’ll have instant access to a loan up to $1000! You’ll receive some funds now and the rest will get saved for you in a Reserve Account. Once you’ve paid your loan in full, the funds in your reserve get released to you. We like to think of this as a healthy way to save while you borrow. 

Need funds now? Download the MoneyLion app and apply for a loan today!  

Credit Building for Young Adults 

Understanding the pros and cons of credit is essential when starting out your credit building journey. 

Falling into a cycle of revolving debt is all too easy, and it can happen in the blink of an eye. Choosing a route like a Credit Builder Loan from MoneyLion can increase your credit score by 60 points within the first 60 days and help you form healthy habits around borrowing and saving early on. 

Download the MoneyLion app today to find out more! 

Build your credit and save

Join Credit Builder Plus to get a loan up to $1,000, credit monitoring, exclusive rewards, access to 0% APR cash advances, and more. Over half of members raise their credit over 60 points within 60 days!