Personal Finance

Kids & Money | Credit cards can mean big trouble for 21-year-olds

Turning 21 is a right of passage: For many young adults that means being able to legally buy a six-pack of beer or gamble on the Vegas strip.

It also means slipping a credit card into your wallet without Mom and Dad’s permission.

Which raises a question: Which of those freedoms do you think 21-year-olds are least prepared to handle responsibly?

I’d argue it’s that first piece of plastic.

Many first-time credit card owners use credit in the wrong way, and it often starts by picking the wrong card for their needs. That can bring trouble faster than it takes to outline a term paper.

Before you know what hit you, your credit is a mess. And that could spell trouble for landing your first job, getting a car loan or staying in school to earn your degree.

That’s why I don’t recommend a credit card for anyone who hasn’t already shown the ability to handle cold hard cash, manage a debit card, and monitor a checkbook (at least online).

Still, there are steps you can take before becoming legally of age to improve your chances of obtaining plastic. For example, paying the cellphone bill or putting the college apartment cable TV or utility bill in your name will help develop your creditworthiness in the eyes of bank card issuers.

Or your parents could co-sign for a card in your name, essentially guaranteeing monthly payments on your account. (Parents: Once Junior turns 21, this would be the time to remove yourselves as co-signers so you’re not on the hook in case of past-due bills.)

Here are some other pointers to help first-timers navigate the tricky terrain of plastic:

• The first question to ask yourself when applying for a card is, What are you looking for? Low or no fees? Low interest rates? Rebate programs where it’s easy to earn points for airplane tickets, dining out and merchandise? What about the initial credit limit?

Like shopping for a car, kick the tires on several credit cards before you apply.

For example, since I recommend paying off the balance every month, interest charges shouldn’t be as important as whether there’s an annual fee for the privilege of holding the card. Or if travel is going to be a big part of your life, look for a card that offers the best perks on airfares, hotel rooms and rental cars — along with low rates and low or no annual fees.

• To efficiently sift through the vast array of credit cards, check websites such as, and You might find a card that comes with better terms compared with the one that lands blindly in your mail.

Also, a secured card might even be your best option for building or rebuilding your credit history, since your borrowing limit is linked to the amount you have on deposit in your bank account.

While at, take the credit card personality test to determine, for example, whether you’re a spender or a debt avoider. That could help narrow your choices of cards.

• It also goes without saying that you need to read the fine print on the card application and promotional materials. Is the card dangling a low introductory interest rate? If so, when does it expire, and what will the new rate be? How long is the grace period before interest is charged?

• Even after thoroughly reviewing your options, you still could get rejected. It’s not as easy as it was several years ago for young adults to obtain plastic. Financial reforms have required banks to tighten their credit standards, so any credit blemish in your past could hurt you.

Consider this scenario of two 21-year-olds, based on real stories I hear all the time:

In the first case, this recent college graduate now has a job but missed payments on the electric bill while living off campus his senior year. His credit card application was rejected.

Then there’s the 21-year-old college senior with no income but a record of paying his college apartment rent on time. What’s more, he has had a credit card for two years, co-signed by his parents. His application was approved.

Make sense?

Whether you’re accepted for a specific credit card may also be influenced by the type of card you apply for.

“Some cards are for people with little or no credit in which a person new to the credit market would likely be approved,” said Bill Hardekopf of “Other cards require good to excellent credit, so a young adult may have trouble getting approved for this type of card.”

Bottom line: Getting that first credit card usually is a reflection of your creditworthiness.

If you’re rejected the first time, wait a few months, keep paying your bills on time, and check your credit score for free to make sure there were no mistakes by going to

Then try again — and scout out your options carefully.