Editorial Policy

Early Grad Seeks Credit Independence

Erica Sandberg

April 17, 2013

QDear Erica,

How do you know if you need credit cards — and how many you should get? And how can I get one? I'm 16 and graduating from high school early (in May 2013). I start university in the fall when I'm 17. My father is paying for my school tuition and bills, but I think it would be the right idea for me to get my own credit card separate from him, right? — Mandeep

AHi Mandeep,

Congratulations, young graduate! An exciting new and independent life awaits. Does it include a credit card that belongs to you only, though? Probably not — at least not yet. While you may be capable of responsible borrowing and repaying, you are still a minor in the eyes of the law. Unless formally emancipated (and sometimes not even then), people under the age of 18 cannot enter into legally binding contract — such as those for credit cards.Ask Erica

Still, if your dad (or other adult) is open to having you join him on his personal account as an authorized user, you can have a card with your name on it. The advantage is that you can charge on it, and the account's activity will appear on your consumer credit reports. As long as the account remains in good standing, you'll build a positive credit history. Then, by the time you're allowed to get your own account, you'll have a demonstrated payment pattern that can give future lenders confidence that you'll be a worthy customer. The downside for you is that the account owner will be getting the statements. So if that person is your dad, he'll know if you're buying textbooks or pizzas.

If you really want to fly under the radar yet still swipe plastic, consider getting a prepaid card. True, they aren't credit instruments, as you're just using cash that you've loaded onto them, so they generally won't help you build a credit history. They can be a valuable learning bridge, however, as you'll become accustomed to the process of managing spending within a specific limit. Once you've reached the amount you've loaded onto the card, you can't use it again until you add more money.

Many prepaid cards are branded with a Visa, MasterCard, American Express or Discover logo, which means you can use the card wherever those card networks are accepted. Many prepaid cards also come equipped with some consumer protections that aren't available with cash. If you lose the card or it's stolen, you may be able to have the funds reimbursed — or at least have the card frozen and the remaining funds protected. Read the terms thoroughly before signing up, as some prepaid card come laden with fees.

However you get a card in your wallet, I suggest using the next couple of years very well and proving to your dad that you're financially adroit. For example, if he'll be giving you a stipend, always spend less than that amount so you don't run short and have to ask for more. Open a savings account and set some dollars aside. If you have time after your studies, work a little and save some of what you earn, too.

It won't be long before you're 18 and technically an adult. Unless you have a job that can support a credit line, though, you still won't be able to get your own credit card without a co-signer until after you hit 21. Your dad may be willing to co-sign, however, and make you the primary owner, especially if you've used a prepaid card wisely, stuck to a budget, toiled at a job and squirreled away a bit of cash. He'll still be liable for delinquent debts if you blow it, so if he's not willing, I understand. I'm not a huge advocate of co-signed accounts myself. In that case, wait it out. You have many decades of autonomous charging ahead of you.

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