How do you know when you are ready for a credit card? - News: On Air. Online. On Demand.

How do you know when you are ready for a credit card?

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By Andrew Housser

When is the right age for people to get a credit card? According to the Credit CARD Act, passed by U.S. Congress in 2009, it is sometime after age 21. That law made it much harder for younger people to get a credit card, unless they prove they have enough income to pay the bills or have an adult co-signer.

Even after age 21, of course, it can be all too easy to go into debt. People of all ages find themselves charging more on their credit cards than they are able to pay. Others use a credit card as an emergency fund during a period of financial crisis, such as a job loss, divorce or situation where unexpected medical expenses mount Debt and interest mount, and it may take months or years to eliminate the expense. 

More than one-third of millennials, people aged 18-29, do not have a credit card, according to a survey by Yet a credit card can be a valuable tool to build a credit history. It also offers a safer way to pay for online purchases and purchases while traveling, and can serve as a helpful convenience. How do you know if you are ready for a credit card? Make sure you have achieved these milestones first.

1. You know how to create and use a simple a budget. You will need to understand your income and your cost of living, how to set up a budget, and track expenses and progress toward the goals you have identified. It is important that you know how to, and do, live within your means. Otherwise, a credit card can be too great a temptation to spend beyond what you earn. 

2. You have a savings plan. A credit card is a payment method, not a source of more money. Having a plan in place to save a set percent of every paycheck helps assure that you are building good financial habits. By building an emergency savings fund, you will reduce the need to run credit card debt in a financial crisis. Having savings also shows that you are able to think ahead for future needs – another sign that you might be ready for a credit card.

3. You pay your bills on time. Paying bills on time affects your credit score, and in many instances, your ability to obtain a car loan, a home loan or certain jobs. It also affects how much those future loans will cost you. Before considering a credit card, make sure have a system in place that helps you pay all bills on time, every time.

4. You understand the basics of credit. Many people begin learning about credit when a parent or friend lends them a few dollars, and they pay it back. Credit cards are more complex. Because you cannot see the money you are spending, it is easy to overspend. In addition, if you do not pay the entire bill when it is due, extra costs will add up in the form of monthly interest. Your credit card bill will require a minimum payment, but if you pay only the minimum, 

it could take years to pay off even a small charge. And the longer you take to pay, the more the purchase costs. It is extremely important to charge only what you can pay off in full each month.  

5. You can take responsibility for your credit profile. As you begin building your credit history, you will need to check your credit profile on a regular basis to make sure it is accurate. Everyone can get a free copy of his or her credit reports once per year. Visit to do so. It is especially a good idea to do this before you apply for credit. Make sure to review the reports carefully for any errors. If you find any inaccuracies, follow the directions on the credit agency’s website to correct them. When you do get a credit card, careful and responsible use will help build a positive credit profile.

If you have accomplished each of these milestones, you might be ready for the challenge of handling a credit card. Whatever your age and whatever your financial status, spend only what you can repay, and you will find that your credit card can be a worthwhile financial tool.

Andrew Housser is a co-founder and CEO of, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
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