When to open a credit card: What you need to know

Credit cards can be an excellent tool for building or repairing credit. If you use it wisely! We'll explain the reasons to get a new credit card, how often you should get a new credit card, how to open a new credit card, and how to use a new credit card well. 

The legal age for credit cards

Prior to 2009, it was easy for an 18-year-old to be approved for a credit card. This led to a lot of debt and other problems for young people starting out, and it can be argued that handing out cards so freely to teenagers was a predatory lending practice by credit card companies. In 2009, the Credit Card Accountability and Disclosure Act went into effect. The Act made it much more difficult for anyone under 21 to be approved for a credit card.

Legally, you have to be 18 to sign a credit card contract but getting an unsecured card is tough if you're not 21. You'll have to provide proof of steady income for approval. 

How a credit card can help you

For those who have little to no credit history, a credit card can help build it. Making your monthly payment gives you an on-time payment, the biggest factor in your credit score, as most credit card payments are reported to at least one credit bureau. If your credit score is not ideal due to past financial mistakes, a credit card can help repair your score. In both cases, a secured card may be easier to be approved for than a traditional card.

Credit cards can also offer perks like buyer protections, travel rewards, and cash back.

Opening a new credit card

It's best to check your credit score before applying for a credit card. You can do so at sites like Credit Karma or Credit Sesame. Next, consider what perks you want in your card. A good cash reward card is always nice, giving users a small percentage back on most or all purchases. Once you have a card in mind, go to the card's website and look for the minimum required credit score for approval. Most cards provide this information. 

Only apply for a card you have good odds of being approved for. Each time you apply for credit, your credit score is negatively impacted, so you don't want to take the credit hit for a card you likely won't be approved for.

You can apply for most credit cards online, and it takes just a few minutes. In some cases, you may be asked to provide additional information. In most cases, you'll get an answer online almost immediately. If you're turned down, the credit card company will notify you of the reason. This is helpful information as it can help you understand what aspects of your credit score need work.

While there is nothing inherently wrong with having multiple credit cards, that can lead to trouble. There can be the temptation to use cards for non-essentials and multiple due dates to keep track of. 

Use credit cards wisely

You don't have to be 18 to get into trouble with a credit card! Credit cards are not free money or an emergency fund. You should only use a credit card to pay for things you have the cash for. Why use a credit card, then? For the credit building, protections, and perks mentioned above!

Your emergency fund should be cash you keep in a savings account, separate from the money you use to pay your regular expenses in your checking account.

Pay the entire balance every month on time. Set up auto-pay if you have trouble remembering to make your payments. Not only will that protect your credit score, but it will also prevent you from being charged late payment fees.

Don't apply for a credit card with an annual fee, money you pay just to have the card. In some cases, the perks offered offset the cost (generally travel rewards cards) but not for most people, and plenty of good rewards cards don't charge an annual fee.

Upwardli can help

Credit is a big part of the U.S. financial system, credit history, credit scores, credit cards, and credit bureaus! It can be overwhelming for beginners. Upwardli has created dozens of informative articles to help you understand all things U.S. personal finance. We can also help you build your credit and connect you with financial service providers who understand not everyone has things like credit histories and Social Security numbers. Whatever questions you have, Upwardli is here to help!