Credit Card at 16?





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Discus: Parents Forum: 2004 Archive - Part 2: Credit Card at 16?
By Mini (Mini) on Wednesday, July 28, 2004 - 10:54 pm: Edit

So d. is headed off next month. Sigh. She is very good about money (in fact, the big message we keep on sending is that she should spend more, when it will make a difference in her quality of life/education.) She will get a locat atm/debit card and checking account in NOHO.

But, we thought she should have a credit card. Bigger purchases. Plane tickets. Train tickets. Etc. It is easy enough for me to simply get another card on my business account, but we also thought it would be a good idea for her to be developing credit.

She's 16. Our local credit union won't give her one, even with a parental guarantor and co-signer. Anyone managed to find one for an under-18? Or is simply impossible?

By Angstridden (Angstridden) on Wednesday, July 28, 2004 - 11:01 pm: Edit

Cant you get her a card on an account YOU have with her name on it?

By Strick (Strick) on Wednesday, July 28, 2004 - 11:03 pm: Edit

We got a "student" checking account and credit card with me as a joint signer for my 16 year old with our bank when he registered for college his freshman year. By cooincidence our bank had a branch on campus and had set up a both near the yearbook table. Made it easy because we were able to set up a periodic automatic transfer for his spending money.

You may just have get her a checking account at the same time so she's offically a bank customer or locate another bank that's more used to and interested in getting student's business while they're young.

My mother set up local store accounts for my brothers when we were twelve and used them to buy school clothes and such. Paid them off immediately. I had great credit by the time I was 18. I think it's wonderful idea if your child is as responsible as you say.

By Bookworm (Bookworm) on Wednesday, July 28, 2004 - 11:15 pm: Edit

Citibank was very cooperative in setting up a card for 14 yo, and I could keep an eye on purchases online.

By Mini (Mini) on Wednesday, July 28, 2004 - 11:16 pm: Edit

"Cant you get her a card on an account YOU have with her name on it?"

--

Yes, but the credit doesn't accrue to her, and bills come through me (that's what we'll do if all else fails.)

By Calmom (Calmom) on Thursday, July 29, 2004 - 12:29 am: Edit

My daughter has had a credit card since she was 8... but that was a mistake. (You know all those junk mail credit card offers that come in the mail? Well, the bank sent one to her, she filled it out & mailed it in, and soon after the credit card arrived in the mail.)

However, if your child has a joint credit card with you, the credit WILL accrue to her. I found this out this past year when my son needed a credit report to rent an apartment -- we ordered the report on line, and it it included my payment history on my Sears card, for as many years as I have had it -- so according to the credit report, my 20-year-old son had an excellent 30-year history of paying his revolving Sears account on time.

That is a little different from merely getting the kid a card on your account, though. I do think the best thing to do (in most circumstances) is to apply for a credit card in the child's name with the parent as a cosigner or joint holder of the card; have bills sent to the permanent address and also set things up for online billing - a kid at college will always have internet access and so can check the statements online.

By Achat (Achat) on Thursday, July 29, 2004 - 08:43 am: Edit

I agree with that. We have a citibank visa card. We got our son (who will turn 18 in a month) the same one but jointly with him and my husband's name. It has the same amount of credit but I trust my son not to go on a spending spree with it. He hasn't so far. He is in Europe right now and not used it except to pay his student hostel charges.

By Originaloog (Originaloog) on Thursday, July 29, 2004 - 09:45 am: Edit

Mini, if your child is named on a CC issued through you, the credit history does accrue to her too. At least that is what Suzi Orman said. After that show we put our son's nam,e on one of our cards.

By Dmd77 (Dmd77) on Thursday, July 29, 2004 - 10:12 am: Edit

Frankly, I don't understand why you think your child needs a credit account. IMHO, it's asking for trouble.

I checked the FICO web site on how credit ratings are scored, and having a credit card with a co-signer (required under 16) doesn't really seem to help. They offer a free booklet on establishing good credit, BTW. (http://www.myfico.com/Offers/myFICO_UYCS%20booklet.pdf)

The part I found most interesting is that having a credit card with a small balance that is not paid in full every month but carried over (but more than the minimum is paid) turns out to be the best way of having a good credit rating.

However, keep in mind that if your child has student loans, the payments on that have more effect (not affect) on the credit rating. So, too, do regular rent payments (if the landlord reports to FICO, which some of them do). Not bouncing checks matters too.

In short, just having a credit card doesn't help unless it's part of a larger picture.

Our kids plan to get credit cards during their senior year of college, but not before that. They don't want to muck up their credit ratings with temptations.

By Marite (Marite) on Thursday, July 29, 2004 - 10:30 am: Edit

My college student is generally frugal and so we trusted him with a credit card. It worked out well, on the whole.
It was not the temptation to splurge that caused problems, but naivete. Like most college students, he became the target of telemarketers (that was before the National Don't Call Me Registry). This one offered him a credit card with great terms (or so the telemarketer claimed) if my S signed up for magazines at what was claimed to be a favorable rate for multiple years. My S was not particularly interested in the magazines but thought the credit card was a good deal. He was unfamiliar with subscription rates and did not realize how exorbitant they were. It took us many phone calls and letters to sort that out. Funnily, he still receives some of the magazines because the subscription departments have probably not updated their data.

My conclusion is that a credit card will not provide temptation to kids who are not easily tempted. But it will allow them to say okay far too easily to snake oil salesmen.

By Soozievt (Soozievt) on Thursday, July 29, 2004 - 10:49 am: Edit

dmd...credit rating aside....but on the issue of just having a credit card when college age, I think each situation must be weighed individually. Your point about mucking up credit cause of temptation is indeed a problem for some kids who would use the credit card for either unnecessary purchases or for things they could not afford. This could be a problem in the hands of some teens. However, not for all teens.

We have just ordered a credit card on our cc account for our entering freshman. This kid, like Mini's, is not really a spender in the first place. Sometimes I have to encourage her to use some of the money she saves up or gets for gifts once in a while. Also, she is very very trustworthy and responsible. She knows that the credit card is only to purchase clothing within the limits of her clothing allowance and for emergencies. It was going to be for textbooks but we got a bookstore credit card in her name (that we will pay) for those and she knows we will only allow that to be used for course books and related school supplies. I feel absolutely certain that she will abide but whatever restrictions we placed on these cards. She will open a checking account in the city where she is going. She will transfer her own substantial earnings into that for spending money plus we will mail her a spending money check per month. Once she goes through what we send per month, she has her own earnings for that purpose. Now, when my next child goes off in a year, I will have to see how we handle the money set up as she may not be as responsible though she will be maturing more by then. The restrictions will be in place and if she cannot abide by them then we will have to rethink her money arrangements as far as credit cards and such. She did go on a ten day overseas trip and another trip by herself to Florida this past year where she had to manage money and categories of her money for certain things and our money for what we would pay for so she did ok with that. But again, she is not quite as responsible as the older one so we will have to adjust or think of what will work in her situation when she leaves for college at age 16 1/2. I do like the idea of my kids having a credit card in their possession when living out of state because emergencies arise. But we would be agreeing on what the cc could be used for when it is ours. They will have their own money in checking accounts that they earned and can be as wise or foolish with that as they want. But they only have a certain amount from us.

Susan

By Jyber209 (Jyber209) on Thursday, July 29, 2004 - 11:18 am: Edit

Hi Mini,

Our daughter did get a credit card at 16 (4 years ago). It was a special offer from Capital One that had a program for students - no fee, low credit max (choice of $500 or $1,000 limit) and parents would to have full access to account balances, etc.

I guess their idea was to hook the kid on them but we had no objection since it met our needs and was no-cost. We strongly felt that once D was driving, she should have the ability to pay for any emergency car repairs, etc. The credit card in her wallet gave us peace of mind.

She also used it shopping occasionally (even at the supermarket) and thus built up a credit rating. Always paid bill in full.

In college she used it to pay for her books (often online), book her train reservations, etc.

Eventually, I think her limit was raised and of course at this point she has no need to be on the special student account but no reason not to either. It also worked from Capital One's end since she is still their customer.

Anyhow, this worked fine for us. D is a savvy/practical enough kid to know not to abuse credit. She also knew she'd have to face the natural consequences if she did! We never even felt a need to use our parental access to the account. Now that she is in China it's another source of "emergency" funds if needed, but has not been used much at all (Her bill now comes here).

Your D sounds like she would be fine whatever you decide to do. Credit is a problem only if mishandled/abused.

By Songman (Songman) on Thursday, July 29, 2004 - 11:55 am: Edit

Just a thought: Having spent at least ten years of my career directly in credit/loan retail banking I never understood why young people need to build a credit rep. Most people will say "well suppose they want to buy a house or car they need a credit history". Unfortunately, I believe that this is a myth that is perpetuated by the lending institutions. We never rejected a credit app that did not have a credit history when purchasing their first home. And every car dealer that I have spoken to has stated that anyone can get a loan for a car including people with a poor credit history.

Given the fact that you said your daughter is responsible and frugal with money, I do not see any harm to it,but wanted to clear the air that IMHO (depsite what Suzie Orman may say-does she encourage credit for young adults?)one does not need to obtain a credit card to build a credit history for the major purchases they may incurr later in life. For that matter ,they don't even need a history to obtain a credit card past 21 as far as I know......just my 2 cents.....

By Athlonmj (Athlonmj) on Thursday, July 29, 2004 - 12:15 pm: Edit

I am 16 years old and I have a credit card. It is a mastercard from Citibank - a joint account with my mom. I personally find it very convenient when I'm getting gas/ at a grocery store / buying clothes / etc. I think my credit limit is around $500, but I rarely spend even remotely close to that much per month. My parents trust me with money because I'm really not a big spender -- I rarely buy anything that I don't need. Take a look at Citibank.

By Ariesathena (Ariesathena) on Thursday, July 29, 2004 - 01:58 pm: Edit

Songman... I'll disagree with you from the other side - that of having no credit history myself for a while and knowing young people (being one myself). When I did not have a credit card, a cell phone company wanted me to put down an $800 deposit. Now, I did not want to be out all of that money, so my friend had to co-sign for me.

While almost anyone can get a car loan, the RATES at which you can get a car loan vary greatly by your credit history. My older sis, with a lousy history, paid 25% interest. My friend, with a great history, paid 1% interest. Same age when they got their car loans, sis for $7k, friend for $15k. I am happy that I have enough of a credit history (and a good one, too) so that I've been approved for my student loans without needing a co-signor. That probably would not have been the case without a credit history... and I'm happy that I can get a cell phone plan without a co-signor or a huge deposit.

By Kingkonglives (Kingkonglives) on Thursday, July 29, 2004 - 03:34 pm: Edit

Hi, I got my credit card when i was 14 because i was going to a summer program away... I'd say that it would definitely help if you trust your child to be frugal (as I am). I would never think to spend money that I don't have, and even if i do have money i usually don't want to waste it...

uhh i have one of those visa cards plane cards where you get mileage blah ...

By Mini (Mini) on Thursday, July 29, 2004 - 03:43 pm: Edit

So....what did I discover? My business account at Capitol One will allow me to add another card (this is the one with the good mileage thing.) They do not (today) have a program for college students (they did yesterday, and likely will tomorrow - it's day by day.) No joint accounts for those under 18.

Citibank has TWO different, no-fee cards for students, one of which doesn't even require a co-signer, and they don't seem to care about age. One card gives 5% back for all supermarket, gas, and drugstore purchases.

Fleet has a "Student Fusion" card -- you show a paid tuition bill or a student ID and they give you a no-fee credit card. Since she is likely to be using Fleet in NOHO (mainly because we live on the west coast, and Fleet is now Bank of America), this is likely the way we will go. (But I'll get her one on my business anyway.)

Thanks for the help.

By Songman (Songman) on Thursday, July 29, 2004 - 03:49 pm: Edit

Aries-True! I did not take the cell phones into account. Showing my age. I do know this much though many non- financial (non-bank or credit union,credit companies,and funding companies) lenders have ridiculous rules and rates for people without a credit history. Higher rates,co-signor etc. Tell your sister she should always apply first at a credit union or bank as they are bound by truth in lending and EOC laws regarding credit. They will get into big time trouble especially if they do not extend credit in low income areas or to minorities. Generally though they will tell your sister what she has to do to repair her credit history, but they do not charge higher rates based on credit history. You know as a planner I generally tell people to avoid credit at all cost. It appears that the lenders have won at this game as one cannot order a cell phone or book a flight without a credit card. Cash is no longer king in some cases I guess......

By Ariesathena (Ariesathena) on Thursday, July 29, 2004 - 03:59 pm: Edit

Songman: Thanks so much! I'll let her know. I think she's at the point where (as she hasn't had a card in a few years), she's better off not trying to pay off her old debt, as it will kill her FICO score... but I will pass on your advice.

You are right that cash doesn't work anymore. My sis has me buy her plane tickets, then gives me cash when she arrives up here. She also does the pre-paid cell thing to avoid the ridiculous deposits. My family does things like pay cash for cars (no loans), paid tuition in full, and then they get berated every so often when someone says that they don't have any "payment histories." Grrr. I advocate a credit card (ONE!) with a small limit, and the amount of the limit being set aside somewhere else. Worse case scenario: kid goes crazy, maxes out the card, and then they can cut up the card, use cash reserve to pay it off, and call it a day.

By Strick (Strick) on Thursday, July 29, 2004 - 05:30 pm: Edit

"And every car dealer that I have spoken to has stated that anyone can get a loan for a car including people with a poor credit history."

That apparently wasn't always the case. I bought a car on credit when I turned 18 and the dealer was stunned that the loan went through so smoothly. Having had a checking account and credit record for 6 years made a difference.

Besides, cars are different since they're a easily secured loan. (My father was in the car business - some dealers and lenders like when you buy more car than you can pay for. Lots of money in the reposession cycle if the car's already depreciated past the first buyer) It was also nice to get a phone and utilites without a deposit the first time.

By Demingy (Demingy) on Thursday, July 29, 2004 - 07:23 pm: Edit

Ariesathena, thanks for pointing out the deposits. I was going to do the same thing, in fact I'm going to elaborate on it. In my experience, my good credit rating has saved me from paying a $50 deposit on my phone/DSL service, a $99 deposit on my utilities, an extra $200 deposit on my apartment, and a $150 deposit on my cell service. I've also had to use my credit card when booking hotels and airfare--even though I haven't had to do this, I'm pretty sure it is the same with rental cars (at the very least I have a deal where I can get a significant discount if I use my card).

By Emeraldkity4 (Emeraldkity4) on Thursday, July 29, 2004 - 07:58 pm: Edit

I just bought a car and my credit report is really screwed up cause there are addresses on it where I have never been let along lived, and court decisions in CA when I haven't been in CA since I was 13.
Apparently the car dealer doesen't care. I am also not thrilled at having to straighten it out, don't I
have enough piddly crap to deal with?

I recommend everyone even students who have never used their credit order a credit report at least every year.

By Songman (Songman) on Thursday, July 29, 2004 - 11:36 pm: Edit

Took me two years and a lot of aggravation to get Citibank to clean up an incorrect entry on my credit report. The most frustrating experience I ever had with a company and its bureauracracy!

By Mimk6 (Mimk6) on Friday, July 30, 2004 - 01:28 am: Edit

We are going to get our D a card on our account -- my husband only wants to check one bill. With our oldest we did not do a CC because he was close to home. She will be 3,000 miles away and if there is an emergency I want her to be able to buy an airline ticket or whatever. A check from here to there could take too long.

By Ariesathena (Ariesathena) on Friday, July 30, 2004 - 02:02 am: Edit

Rental cars, rental trucks (like Budget, UHaul, Penske), hotel rooms, and the like all require credit cards. Some applications for apartments require them. Having a credit score (and a decent one) will save money on car insurance, as those with good credit tend to be better drivers.

By Ausmithe (Ausmithe) on Friday, July 30, 2004 - 02:41 am: Edit

My daughter got the Capitol One $500.00 limit card when she was 16 and I co-signed. She is the only one who used the account and always paid on time etc. Now that she is 18 and leaving for college she applied for a different account that offered airline miles etc. but she was turned down by two companies because they said she lacked sufficient credit history. When she called they told her the Capitol One account did not count at all in establishing credit in her own name because I was a co-signer.

By Angstridden (Angstridden) on Friday, July 30, 2004 - 08:27 am: Edit

My D. applied for a Citibank student card they sent her a letter asking for more proof ie student ID with current status on it or school bill. We dont have either of those right now Ie her id card did not have current enrollment sticker and no paper bill yet.
BUT meantime she was sent an offer from Vision Visa.
It included 2% cash back, no annual fee, a lovely 10% discount at her bookstore. So I cosigned and she applied . I was told that my name could be removed after a year.
We figure that with her debit card will be great..and its an easy way for her to establish credit in her name.

By Anovice (Anovice) on Friday, July 30, 2004 - 03:29 pm: Edit

I have had a credit card with CitiBank since I was 12. I know that I have a separate bill from my parents but I'm not sure about if their name is on my card. I really should check. I recently got some of my bills transfered to my name to start establishing credit... I'm not paying them with my money but thats another issue. I think its great, especially if you are forced to keep track of what you spend, etc. It really taught me alot... I've been in charge of paying the bills in my house since I was 14. Definitely got an appreciation for debt too.

By Liek0806 (Liek0806) on Monday, August 02, 2004 - 03:08 am: Edit

READ HERE, READ HERE,READ HERE, READ HERE,READ HERE, READ HERE,READ HERE, READ HERE,READ HERE, READ HERE,READ HERE, READ HERE

I'm 16 years old and I have a Discover Platinum. It had an introductory rate of 0% for 6 months, and well thereafter was fixed 7.99%
What you could do is apply for a credit card for yourself and under the authorized users put your daughter under there, most of the credit card applications just ask for the name, I know American Express wont allow anyone under 18, but at least with Discover and some other ones take out a card under your name and have your daughter be an authorized user, and she'll be able to use with out a problem.
For me when I usually use it, the bill arrives in my mom's name and I go get a money order and pay for my own debt, which I guess in the end helps out my mom's credit more than mine, just because in the authorized user they didn't ask any other information but the person's name.

By Rhonda63 (Rhonda63) on Monday, August 02, 2004 - 01:16 pm: Edit

I put my D on my credit card when she was just 17 (beginning of senior year) mainly for convenience and so she wouldn't need to carry a lot of cash. She used it 3 times that year, once for her prom dress, once for materials for a school project, and once for a $15 clothing purchase. She had the same card this year in college, and she has used it only infrequently (for buying books and occasional CVS and grocery purchases, plus a couple of on-line purchases). She usually e-mails to let me know, so I'll be aware of the charge when the bill comes (since I always check the charges to make sure there are no errors).

Soozie -- I actually did not get the Brown bookstore credit card, because she can use the CC she has, and will get the 1% cash back (only a few bucks on books, of course). I didn't see the need for the bookstore card when you have your own CC.

By Ndbisme5 (Ndbisme5) on Monday, August 02, 2004 - 01:57 pm: Edit

It's really funny when I see Suze Orman's name misspelled. I thought it was Suzy.

By Ndbisme5 (Ndbisme5) on Monday, August 02, 2004 - 01:57 pm: Edit

It's really funny when I see Suze Orman's name misspelled. I thought it was Suzy.


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