Writer: Adam West
Editor: Lillian Guevara-Castro
Reviewer: Ashley Fricker
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Turning 18 can be an exciting time, full of new adventures. Many will leave home for the first time, vote for the first time, and buy their first Powerball ticket in the fruitless hope of becoming a millionaire.
At one time, another rite of passage for newly-minted 18-year-olds was to signup for their first credit card, choosing from among the bounty of applications inevitably hitting their mailbox — until the CARD Act of 2009.
These days, the CARD Act (Credit Card Accountability, Responsibility And Disclosure Act) requires consumers under the age of 21 to have a cosigner or a steady income to obtain a credit card. In one fell swoop, the CARD Act limited the options for 18-year-olds to obtain credit from the entire consumer marketplace down to a handful of issuers and cards.
Though somewhat limited, the best credit cards for 18 year olds are still out there to help you start building credit.
Students | No/Limited Credit | Prepaid | Secured Cards
Best Student Cards For 18-Year-Olds
Those under the age of 21 who wish to obtain a credit card under their own name will need to have a regular income substantial enough to repay any credit card debt. At the same time, that income doesn’t necessarily need to be from a job, which can open up some doors — particularly for students.
Why? Because you can typically report extra money from scholarships, grants, and fellowships as income on a credit card application. What’s more, you can also find a range of credit cards designed specifically for students, with flexible credit requirements and room for those who have yet to start establishing a credit history.
You can start exploring some of the best student credit card options available below:
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One important thing of which you should be aware of is that certain types of school-related monies should not be reported as income on a credit card application, the most prominent of which is student loan funds.
Basically, since your student loan is really a type of debt rather than actual income, it’s a bad idea to claim it as such. In other words, you’ll need to pay back your loans, meaning they’re not a very reliable option for repaying other types of debt.
Moreover, if you need to falsely report student loan funds as income to qualify for a student card, you probably don’t need to take on any other potential sources of debt in the first place — particularly not ones with the high interest rates that come with revolving credit lines.
Best Cards For 18-Year-Olds With No Credit
The main issue with not having an established credit history is that issuers can’t get an idea of how much financial risk you present. Think of it like this: if you were to lend someone money, wouldn’t you want to know they can — and, more importantly, will — pay you back? That’s where your credit history comes into play. Enter: the starter credit card.
Offered by many major issuers (and not-so-major ones, too), starter cards are like the base model subcompact car of bank credit card products. In other words, they’ll get you where you need to be, but they’re not likely to have a lot of creature comforts, like purchase rewards on eligible purchases or lucrative signup bonuses. Our favorite cards for those with no/limited credit include a number of annual-fee-free options.
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After you open your first credit account, your creditor — the credit card issuer, in this case — will start reporting your payment behavior to the three major credit bureaus (Equifax, Experian, and TransUnion). This will establish your consumer credit profile, which credit scoring agencies will use to calculate your credit scores.
FICO is the most commonly used credit scoring agency, and the FICO Score 8 the most frequently used credit scoring model. VantageScore 3.0 comes in a close second.
Since most major credit card issuers now offer free FICO tracking as a benefit to cardholders, you can likely keep track of your changing credit score through your online banking/bill paying portal. Don’t be alarmed or dismayed if it takes some time for you to get a credit score, however, as it takes up to six months of credit history for FICO to have the means to calculate your credit score.
Best Prepaid Cards For 18-Year-Olds
While the CARD Act seeks to protect young people from taking on credit card debt they cannot repay, it can be an inconvenience for those who are unable to obtain a credit card as a result, particularly in the modern world of digital payments. If you are between the ages of 18 and 20 and cannot meet the requirements to obtain a credit card under the CARD Act, your best solution may be to get a prepaid credit card.
When adorned with a credit card network logo — e.g., Visa, Mastercard, Discover, or Amex — prepaid cards can be used just like credit cards to conveniently make purchases anywhere the network is accepted. The main difference is that prepaid cards need to be loaded with funds to be used, sort of like a gift card or debit card.
Unlike gift cards, prepaid cards, including our expert-rated options below, can receive direct deposits.
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¹Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.
²Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.
³Chime SpotMe is an optional service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.
Although prepaid cards can be used the same way as credit cards for purchases, prepaid cards have one key difference: They cannot help you build credit like a credit card can.
Credit card purchases borrow money from the issuing bank to pay for purchases, then you pay off that debt when the issuer bills you. In contrast, prepaid cards use the money you load onto the card to pay for purchases directly and must be reloaded once that money is spent.
And because prepaid cards are not technically credit cards, they are exempt from the CARD Act and do not require a credit check to obtain. Prepaid cards are not tied to your credit in any way and they won’t report your payment behavior to the credit bureaus, meaning you can’t use prepaid cards to establish or build credit.
Best Secured Cards For 18-Year-Olds
Far and away the easiest credit card to obtain — and, arguably, one of the safest — is a secured credit card. Made for credit builders (or rebuilders for those with bad credit scores), secured credit cards require an initial deposit to open the account. That deposit acts as security for the account, and the size of your deposit will determine the size of your credit line.
Since a secured card is less risky for the issuer, they tend to have lower interest rates and fees than unsecured cards for building credit. Plus, your secured card deposit is fully refundable when you close your account in good standing — those pesky unsecured card fees are gone for good.
Many of our top-rated secured cards have no annual fee at all:
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Another reason to go with a low- or no-fee secured credit card over a pricey unsecured credit card is that some secured cards can be upgraded down the line. For example, if you have a Discover it® Secured Credit Card, Discover will periodically check up on your credit progress to see if you can qualify for an unsecured card.
If your credit report passes muster, you’ll be automatically upgraded to an unsecured card, and your deposit will be refunded in full. As an added bonus, the switch is often seen as an upgrade, not a new credit product, which means you’ll hang onto the account history you’ve built with your secured card. (Your average account age is factored into your credit score, so maintaining old accounts can be important.)
Become an Authorized User on Someone Else’s Account
If you can’t qualify for your own credit card but you want to begin building credit, one way to do that is to become an authorized user on someone else’s account. You’ll receive your own card with your name on it, but you won’t be the primary borrower. That means you aren’t legally responsible for repaying the debt.
Becoming an authorized user means the account will be reported to each major credit bureau for inclusion on your credit reports. This will only help, though, if the account is in good standing and managed responsibly.
Ideally, the account will have been opened for a few years, has a spotless record of on-time payments, and has a balance below 30% of its available credit limit.
You should see the account appear on your credit reports after it is reported to the bureaus, which will generate a credit score.
Start Off On the Right Credit Foot
As the young cub in the den, it can be challenging to measure your progress against that of the more experienced people around you. But the thing to realize here is that you have time working on your side, and, when used wisely, time can be a powerful weapon.
To make the most of that time — and your finances — you should start planning for the future as early as you can. This not only means starting to build your retirement savings with your first paycheck, but also responsibly establishing your consumer credit profile as soon as (reasonably) possible.
Ideally, having a parent or other responsible cardholder add you to their accounts as an authorized user can jumpstart your credit journey. Even without this boost, however, you can reasonably build credit in a few short months.
So, once you’ve opened your first credit account, you should focus on building a positive credit history. The most important thing to do is to be sure to pay your bills on time and as agreed each month. Late payments can have a devastating effect on your credit, particularly newly established credit.
You should also be careful to build credit slowly; opening four credit cards all at once won’t build your credit faster, and it could have the opposite effect if you can’t stay on top of the payments. Plus, every credit card application will result in a hard credit inquiry, and excessive inquiries can do some serious damage to a fledgling credit profile (and not a little damage to an established one, for that matter).
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