Q: So, I am about to turn 18. I may need about $100 or so each month to cover the remainder of my rent. What type of card should I be looking to get?
Q: So, I am about to turn 18. I need to build my credit, and may need about $100 or so each month to cover the remainder of my rent. I work a decent amount of time, and will be able to make payments on a credit card monthly. What type of card should I be looking to get?
A: First, happy birthday. Here's your present: that extra $100 you're trying to find shouldn't come from a credit card. It needs to come from additional income. Otherwise, you're going to start your adult life digging a debt hole you'll find challenging to escape. Picking up a few extra hours a month at work or finding a way to earn some extra cash on the side can help you close the gap and maintain your independence.
Second, federal regulations require credit card applicants under the age of 21 to apply with a co-signer. That means you'll need to find a relative or a close friend to put their credit score on the line for you. Don't let them down: any mistakes you make handling this account will reflect on their credit history as well as yours.
Third, even with a co-signer, banks must set your credit limit based on your ability to repay. Even though your income doesn't factor into your credit score, lenders will ask you about your annual wages. The less you've got to throw at debt, the smaller your credit line will be.
Therefore, at this stage, it might be wise to consider a secured credit card that you can use for the express purpose of establishing a baseline credit history. A handful of banks specialize in offering secured cards at fair and reasonable rates, usually less than the cost of maintaining a prepaid debit card (click any card for more information):
To get your account started, leave $200 or more on deposit and pay an annual fee between $25 and $40. You'll only have a small credit limit, but that's fine. Just charge something very small, like a pack of gum. That small amount is just enough to register on your credit report as purchase activity.
If you don't have a few hundred dollars right now to tie up in a secured credit card, don't sweat it. Sign up for an online high interest savings account, where you can park some cash until you're financially ready to apply for an unsecured credit card on your own.
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