Credit Card Basics for High School Students

As a high school student, you're on the cusp of adulthood. One of the most important financial skills you'll need to develop is understanding how credit cards work. But don't worry! I'm here to guide you through the basics and help you make informed decisions about your financial future.

Key takeaways

• Building credit early can offer significant financial advantages in the future
• Most high school students can't get their own credit card due to age and income requirements
• Becoming an authorized user on a responsible parent's card is a great way to start building credit

Understanding credit cards: The basics

Credit cards can be a powerful financial tool when used responsibly. They allow you to make purchases now and pay for them later, while potentially earning rewards and other perks.

But it's not free money! You'll need to pay back what you spend, and will be charged fees and interest if you don't pay the full balance each month.

As I learned at a young age, credit cards come with both benefits and drawbacks. Getting a credit card as soon as I was eligible helped me understand the basics of managing my finances early. But it also led me into a brief period of overspending.

Thankfully, I got back on track before too much damage was done, but the lesson is clear. If you’re going to get a credit card, you need to know how to manage it responsibly!

Why building credit matters

Good credit is a fundamental building block for many financial goals. Your credit score can affect major life decisions, like getting a car loan, qualifying for a mortgage, or even renting an apartment. Although some credit-building tools are only available to those over 18, there are steps you can take now to lay a solid foundation.

Credit cards for high school students: What's possible?

Getting a credit card in high school isn't easy. Federal laws restrict how lenders can extend credit to young people.

These rules are designed to protect you from accumulating debt you can't repay. However, there are still ways to start building your credit history.

Steps to build credit in high school

Check your credit score

It's important to know where you're starting from. While it's rare for minors to have a credit score, it's not impossible.

You might have a score if:

• You're an authorized user on someone else's card
• You've been a victim of identity theft (i.e. if someone applied for credit under your name)

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Checking your score regularly can help you spot and address any fraudulent activity early.

Open a checking and savings account

While these accounts don't directly affect your credit score, they're the foundation of your financial life. You can usually open a checking account at 13 with a parent or guardian as a joint owner.

These accounts help you learn:

• How to manage money
• The basics of earning interest
• Setting up automatic bill payments

Become an authorized user

This is one of the best ways for high school students to start building credit. Your parents can add you as an authorized user on their credit card. You'll benefit from their good credit habits without the legal responsibility of paying the bill.

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Credit card options for eligible high school students

While most high school students won't qualify for their own credit card, there are a few options for those who are 18 or older:

1. Student credit cards
2. Secured credit cards
3. Cards with a co-signer

These cards often have more lenient approval criteria but may come with lower credit limits or higher interest rates. Companies like Petal, Capital One, and Discover all offer student-focused credit cards.

Dos and don'ts of getting a credit card in high school

Navigating credit cards as a high school student can be tricky. Follow these simple dos and don'ts to build a solid financial foundation while avoiding common pitfalls.

Advantages and disadvantages of getting a credit card in high school

Starting with a credit card in high school can pave the way for future financial success, but it also comes with risks. Here's a quick look at the pros and cons of early credit building to help you make informed decisions.

Advantages of getting a credit card in high school

• Early credit history: Start building credit as an authorized user.
• Financial learning: Gain knowledge on credit management.
• Credit-building options: Use alternatives like authorized user status.
• Foundation for loans: Early credit helps with future financial goals.
• Rewards potential: Earn perks with responsible card use.

Disadvantages of getting a credit card in high school

• Overspending risk: Credit misuse can lead to debt.
• Limited access: Most minors can't get their own credit card.
• High interest rates: Student cards often have higher rates.
• Low credit limits: Student cards usually offer limited credit.
• Identity theft risk: Young users are vulnerable to fraud.

Why trust TuitionHero

At TuitionHero, we help students navigate college finance with valuable resources and guidance. We provide education on credit management, scholarship applications, and student loan options. Our goal is to support your journey to financial literacy and independence. Trust TuitionHero to guide you toward smart financial decisions.

Frequently asked questions (FAQ)

Can I get a credit card if I'm under 18?

Generally no. Federal law prohibits issuing credit cards to people under 18. However, you can become an authorized user on a parent or guardian's card.

How can I build credit without a credit card?

You can start by becoming an authorized user on someone else's card. Additionally, make sure to pay any bills in your name (like a cell phone bill) on time.

What's the difference between a debit card and a credit card?

A debit card draws money directly from your checking account, while a credit card allows you to borrow money that you must pay back later. A debit card typically doesn’t allow you to spend more money than you have, unless you have overdraft turned on.

Final thoughts

Building credit as a high school student is about laying a foundation for your financial future. While you may not be able to get a credit card right away, understanding how credit works and practicing good financial habits now will set you up for success later. Remember, responsible credit use is a key part of your overall financial health.

Source

• Credit Cards | FDIC
• Credit management | Investor.gov
• Credit Basics