Should an 18-Year-Old Get a Credit Card to Build Credit?

While it’s not something that’s extensively taught in most school systems, financial education for youth provides an important foundation for future adults. That being said, many parents don’t know where to start. This, of course, isn’t altogether surprising when you consider that the mere thought of “building credit” can be intimidating and confusing—even for adults!

So, where should young people start? How does anyone build credit without the benefit of an established credit history? At IMCU, we’re dedicated to helping young people and their families better understand money so they can be independent and informed. Some common questions about how to build credit as an 18-year-old, like:

• When—and how—do most people start building credit?
• How does an 18-year-old with no credit build credit?
• When should young people get their first credit card?
• How can IMCU’s SmartStart program and Jumpstart credit cards help 18-year-olds build their credit and learn financial literacy?

We’ve got a lot of ground to cover, so let’s jump right in.

At What Age Can You Start Building Credit?

In most situations, a person needs to be 18 years old in order to start formally building their credit—but there are plenty of steps that can be taken in the years leading up to that milestone. One of the most common approaches is for a parent to add their child as an “authorized user” to an existing credit card. While some credit card companies will have firm rules, there is technically no age limit for being added as an authorized user. While “authorized user” status won’t necessarily help a child to build their own credit, it does help them to better understand financial responsibility.

A more attractive option for many parents is to opt for something like IMCU’s Jumpstart credit cards, which enable young people (18 to 21) to open an account with a low credit limit. This allows them to start establishing a credit history by getting in the habit of making on-time payments. One benefit of Jumpstart credit cards is that they’re very low risk. Parents can also monitor and manage the account, to teach real-world financial responsibility as their children embark on their credit-building journey.

How Do Most People Start Building Credit?

Thinking about how to build credit without credit can feel overwhelming, especially for younger folks. For many people, common suggestions include things like:

• Applying for a Credit Card | A traditional credit card typically requires a credit history, although there are are options available with very low limits so that people can start building their credit.
• Working With a Credit Union | Unlike traditional banks, a credit union like IMCU may offer special lending solutions geared toward people looking to establish credit. For example, taking out—and paying off—a small credit builder loan with favorable terms can slowly but surely build one’s credit history. 

How Does an 18-Year-Old Start Building Credit?

Getting a starter credit card is a typical starting point for young adults on their journey to build credit. That being said, an 18-year-old’s financial education ideally begins at home, well before their 18th birthday, with support and guidance from their parents. For example, parents can start by teaching children the value of money, the importance of saving vs. spending, what it means to borrow or owe, and so on. These lessons help to establish a mindset of financial responsibility that kids can carry into their adulthood. 

As they become high school students, they’re ready to learn more about credit cards—how they work, the benefits and disadvantages, etc. From there, they’ll start to become eligible for credit cards—a milestone that can make many parents anxious.

Is a Credit Card for an 18-Year-Old High School Student a Good Idea?

While not every credit card that’s available for an 18-year-old is going to be a good fit, the right credit card can provide a great way for young people to start building their credit history. 

By getting a credit card at 18 and reliably making payments, your teen can start to build credit over time. That way, when they’re a little further along in their life—ready to buy their first new car or apply for a mortgage, for example—they’ll have the solid foundation they’ll need to secure reasonable terms, make on-time payments, and so on. 

IMCU’s Jumpstart credit cards are designed to provide a constructive option for 18-21 year olds to have and use their very own credit card—with plenty of safeguards in place to help ensure that they build financially responsible spending and saving habits.

How Do Credit Cards Work for 18-Year-Olds?

 Starter credit cards—like IMCU’s Jumpstart credit cards—have features in place that help reinforce responsible usage, and they offer several additional benefits for young people who need to build their credit, such as:

• Low introductory rates and no annual fees.
• The ability to earn points by using the card, which can then be redeemed for things like gift cards or cash back.
• Lower credit limits than traditional cards.
• Rewards for on-time payments.

Another key benefit of Jumpstart credit cards is that parents can easily monitor and manage their usage. For example, young cardholders’ parents can manage their account through an app, set up alerts and spending limits, and more. Ultimately, these cards provide hands-on, real-world education for young people to learn —and build credit—while minimizing risk factors.

What Is the Smartest Way to Build Credit at 18?

IMCU’s SmartStart program was designed to provide a proactive approach to financial education and credit-building for young people. Used in tandem with an IMCU membership savings and checking account, it enables parents to guide their children through activities to introduce and reinforce financial responsibility.

The SmartStart program provides unique capabilities for children as well as parents, including the ability:

• For young people to create and track savings goals, experiment with setting a budget and sticking to it, and learn more about saving, spending, and investing.
• To teach young people about loans, interest, and related topics within an interactive environment where they can request money (and the parent can approve or deny).
• To start developing a mindset of financial responsibility through innovative account management features, like requesting or making transfers, creating a budget, and establishing spending limits. 
• To teach the value of hard work and responsibility through real-world activities like connecting a child’s allowance to completing assigned tasks or chores.

IMCU: Innovative, Real-World Solutions for Teaching Financial Responsibility

Whether you’re looking to begin introducing concepts of financial responsibility or exploring different credit cards for 18-year-olds with no credit history, IMCU’s SmartStart program and Jumpstart credit cards were designed with young people (and their parents) in mind. To learn more or get started, either reach out or find a branch location near you today.