Maintaining a good credit profile is essential if you ever plan to buy a house, take out a car loan, or even buy an expensive cell phone. However, at the age of 16, most of these crucial steps in life may seem distant, but adopting and practicing good credit habits well ahead of time is highly recommended.
The exact age at which one is eligible to apply for credit cards varies from bank to bank. But the minimum age in most banks is 18 years, or in some cases, 23 years. If a salaried or self-employed individual applies for a credit card and meets the age and other eligibility criteria, the process is hassle-free. The applicant needs to have a steady income anywhere between Rs. 1 lac and Rs. 3 lacs, to be eligible for a credit card.
Credit Card for 16-Year-Olds
The only credit card that a 16-year-old can get is an authorized add-on card on the credit card of a legal adult, for example, a parent or a guardian. This infers that the primary cardholder is responsible for paying the bills of the add-on credit card user. Most leading credit card companies allow the issue of authorized user cards at the age of 16 whereas other providers have no such age restriction.
Authorized Credit Card – how it can be used
An authorized user or an add-on credit card is similar to a regular credit card. It comes complete with the name of the individual who is 16 or of lower age but with the same credit card number as possessed by the primary cardholder.
The add-on cardholder can use this card to pay for purchases, just like other credit cards, but the bill will be paid by the parent or holder of the primary credit card. Thus, there is no legal binding on the minor user of the authorized credit card. A detailed breakup of all transactions is shown in the credit card statement of the primary cardholder.
Credit Rating of Authorised Card user
As a 16-year-old add-on authorized credit card holder, there is no credit score or profile as such. When such a credit card is used, the credit card company shares the updated account details to the credit bureaus, and a report is subsequently generated.
The credit rating of the primary cardholder is of vital importance in the entire exchange. If the spending behavior and credit profile are at par, it helps build a strong credit history for the primary cardholder.
Alternate means to Authorised Credit Cards
If the 16-year-old individual is not ready for an authorized credit card, alternatives like a prepaid card or a debit card can be used instead.
Prepaid cards are more convenient and easier to procure but attract a fee. While debit cards, on the other hand, depending on the credit profile of the applicant. The more one uses the debit card for purchases, the more money is debited directly from the bank account.
Dos and Don’ts of getting a credit card at 16
- Credit Rating – If the adult/parent’s credit profile is good, getting an authorized credit card on theirs is an excellent beginning to building a good credit score. The creditworthiness of an individual is very important when taking a student loan or a housing loan, or a car loan. Therefore, if the parent’s financial health is good, the dependent cardholder’s future credit profile will be strong.
- Healthy financial habits – If bills are regularly paid on time, spending proportionally less than one’s income speaks well on the credit standing. Therefore, good spending habits are necessary to maintain a good credit record.
- Rewards – Usually, the primary credit cardholders enjoy offers and rewards on their card, but sometimes the authorized add-on cardholder also gets to enjoy a part of it.
- Big Responsibility – Using an underage credit card comes with a huge responsibility. There must be strict discipline in place while using it, as blind overspending can damage the primary card user’s credit score.
The responsibility of owning a credit card, whether minor or not, is enormous. So, when the minor individual gets an add-on credit card in the form of an authorized one or lifetime free credit card, it must be used responsibly. Any overuse or misuse can cause the primary card holder’s creditworthiness to take a hit and, at the same time, spoil the chances of building a good credit score. So, it is imminent that the beginning of one’s financial habits shall remain clean and transparent.