Best Teen Bank Options

Best teen bank options

Developing financial responsibility should begin early during the teenage years.

Getting a Teen Checking Account: What to Know?

One of the most important ways to get your financial life started on the right track is to begin building credit when you’re young. This includes getting a credit card and using it responsibly to start establishing a positive credit history and good credit score.

Although it is easy to disparage the idea of teens walking around with plastic in their wallets, there’s another side to the argument loaded with good reasons as to why they should have a credit card.

Assuming teens are able and willing to exercise a mature level of responsibility, there are several benefits that stem from having a credit card at a young age.

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Benefits of Having a Credit Card as a Teenager

Getting a credit card as a teenager has many benefits, including:

  • Getting an early start on building credit: It takes several years to build credit because your credit score is determined by factors such as payment history and the age of your accounts.

    If you get a credit card early, you can start early and hopefully have a high credit score by the time you graduate from college so you can easily get an apartment, car loan, or even a mortgage.

  • Learning financial responsibility: When you get a credit card, it’s important to learn how the card works, how your use of credit affects your credit score, and why it’s essential to pay your bills on time.

    Best teen bank options

    Having a credit card can help teens develop these essential skills at a young age.

  • Developing good spending habits: Teens who have access to a credit card can learn to manage their budget and spending to make sure they don’t charge more than they can afford to pay in full when their statement arrives.
  • Peace of mind: When teens have access to a credit card, it can be used to cover emergency expenses.

    Many cards also provide travel insurance, car rental insurance, extended warranties, coverage for damaged or stolen cell phones, and even free credit score access.

Although there are clear advantages to getting a credit card as a teen, you can’t get a card of your own until you’re at least 18.

How Old Do You Have to Be to Open a Checking Account?

You need to make sure you select the card that’s right for your situation. In this case, you want a card that reports to all three major credit bureaus.

The Best Credit Cards for Teens

Here are some of the best credit cards for teens you should consider if you’re over 18 and can qualify on your own, or if you can find a cosigner.

Capital One Journey Student Rewards

Here’s what you need to know about the Journey® Student Rewards from Capital One card:

  • 26.99% variable APR (no 0% promotional APR for purchases or balance transfers)
  • No annual fee or foreign transaction fees
  • Earn 1% cash back on all purchases
  • Pay your bill on time to boost your cash back to 1.25% for that month

Young adults can qualify for this student credit card even without established credit but may need someone to co-sign if they’re under the age of 21 without sufficient proof of income. 

Discover it Student Chrome

Here’s what you need to know about the Discover it Student Chrome card:

  • 0% intro APR on purchases for six months; after that, standard variable purchase APR of 15.24% to 24.24%
  • No annual fee or foreign transaction fees
  • 2% cash back at gas stations and restaurants on up to $1,000 in combined quarterly purchases; unlimited 1% cash back on all other purchases
  • Cash back match at the end of your first year
  • $20 statement credit each school year your GPA is 3.0 or higher (for up to the next five years)

Like the Capital One Journey, you don’t need a strong credit history to qualify for this student card — but you may need a cosigner if you’re under 21 without proof of sufficient income.

The Petal Visa Credit Card

Here’s what you need to know about the Petal Visa card:

  • Variable APR between 15.24% and 26.24% (no 0% promotional APR for purchases or balance transfers)
  • No annual fee, foreign transaction fees, late fees, or over-the-limit fees
  • 1% cash back on purchases depending on how many on-time payments you have
  • No credit history or security deposit required

Petal Visa looks beyond your credit score to consider an applicant’s entire financial picture, so teens who haven’t had time to build credit may be able to qualify — although a guarantor may be needed depending on income.

The Discover it Secured Card

Here’s what you need to know about the Discover it Secured card:

  • 25.24% variable purchase APR (no 0% promotional APR for purchases or balance transfers)
  • No annual fee or foreign transaction fees
  • 2% cash back at gas stations and restaurants on up to $1,000 in combined quarterly purchases; unlimited 1% cash back on all other purchases
  • Cash back match at the end of your first year
  • Automatic monthly reviews starting at eight months to see if your account qualifies to “graduate” after demonstrating responsible credit use

Because the Discover it Secured card requires a security deposit equal to your credit line, teens who are 18 and over may have an easier time qualifying for this card without a cosigner.

The Capital One Secured Mastercard

Here’s what you need to know about the Capital One Secured Mastercard:

  • 26.99% variable APR (no 0% promotional APR for purchases or balance transfers)
  • No annual fee or foreign transaction fees
  • No rewards or signup bonus

As with the Discover it Secured card, you have to put down a deposit with the Capital One Secured.

Best teen bank options

However, your deposit may be as low as $49. The required deposit is determined based on your credit.

Since it is a secured card, it can be easier for teens to qualify with no cosigner.

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Plus, after you’ve had the card for five months, Capital One will automatically increase your credit limit if you’ve made all your payments on time.

The OpenSky Secured Visa Credit Card

Here’s what you need to know about the OpenSky Secured Visa credit card:

  • 19.64% variable APR (no 0% promotional APR for purchases or balance transfers)
  • $35 annual fee
  • 3% foreign transaction fee
  • No rewards or signup bonus

Although this card has an annual fee, there is no credit check required, which teens may have an easier time getting this card without a cosigner.

The card also has a lower interest rate than many other secured cards.

Things to Think About When Applying for a Teen Credit Card

Although there are some great credit cards out there for teens and benefits associated with using credit, there are also risks and downsides that need to be considered.

Top Checking Accounts for Teens

Some of the key things to think about before applying for a credit card account when you’re young — or before listing a teen as an authorized user on your card — include the following:

  • The cost of using credit. There may be annual fees, foreign transaction fees, late fees, and over-the-limit fees associated with the card.

    You’ll want to know the costs going in and look for the cheapest credit card for teens as possible.

  • It’s easy to be irresponsible with credit. Spending too much or accidentally missing a payment could do long-term damage to your credit score.

    Top 5 Debit Cards For Teens

    Unfortunately, many young people who get credit cards make mistakes that can affect them for a long time.

  • Overspending on the card is a big risk. Without careful budgeting, it’s easy for teens to get in too deep and charge more than they can afford to pay off in a given month.

    That’s especially the case for younger teens who may not understand how credit card interest makes paying off debt difficult. Sometimes, teens also face pressure from friends to overspend or even to lend them their card.

  • Cardholders are responsible for spending by authorized users. If you make your teen an authorized signer on a credit card and your teen overspends, you’ll be responsible for paying the bill.

It’s important to make sure you or your teenager is ready for the responsibility of a credit card before getting one.

Best teen bank options

It’s also a good idea to look for a card with no annual fee, as paying one is rarely worth it when you’re one, even if the card offers a generous rewards program.

How to Get Approved for a Credit Card as a Teenager

If you are under 18, you generally cannot get any type of credit card in your own name because you’re not a legal adult.

Once you are at least 18, you have more options — but the Credit CARD Act of 2009 limits the ability of card issuers to give credit to someone under 21.  

Because of the federal CARD Act, credit card issuers cannot give a card to someone under the age of 21 without a cosigner unless the teen can show sufficient earned income of their own.

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Even when they can, many card issuers simply won’t give a young person a card without a cosigner because they haven’t had time to develop a sufficient credit history of their own.

Here are some ways young adults can gain the necessary experience to eventually get approved for their own credit card:

  • Open a checking and/or savings account with a local bank
  • Obtain a prepaid debit card
  • Be added as an authorized user to a credit card
  • Opt for a secured card with a cosigner

How to Reap the Benefits and Avoid the Traps of Taking on Credit as a Teenager

Although there are clear risks to getting credit as a teen or college student, it’s possible to do so in a responsible way to reap the benefits while minimizing the downsides.

Some of the best ways to do this include:

  • Opening a checking account with a debit card first: Teen checking accounts are often available with no fees and with debit card access.

    Best teen bank options

    Teens can learn to track spending and make sure they don’t charge more using their debit card than what is available in their bank account. This is good practice for getting a credit card.

  • Making a budget: If teens are used to living on a budget and managing money effectively, it’s easier to avoid overspending and ending up in debt.
  • Using a card for just one small monthly purchase and automating payments: You don’t need to spend a fortune on a credit card to build a positive credit history.

    The Best Teen Checking Accounts in 2020: Managing Money at an Early Age

    A teen could get a card, charge one low-priced fixed service per month — such as a Netflix subscription — and set up automatic monthly payments. This would mean there’s no risk of overspending or accidentally making a payment after the due date.

  • Looking for a card with no annual fee: There’s little reason to pay a fee for a credit card when you’re a teen who doesn’t need the added perks of high-fee cards and who usually won’t spend enough to earn rewards that offset the fee.

    (Read more: best no annual fee credit cards)

Parents should also talk to their teens about creating a responsible spending plan, while teens getting their first credit card on their own should make sure they’re really ready to manage their card in a way that will help, not hurt, their credit.

Bottom Line

Credit cards can help teens learn the financial responsibility need for living on a budget and improving their credit score.

But it’s important to make sure you or your teen are prepared to be responsible with the card and avoid carrying a balance. Shopping for the best card is also essential, as there are lots of good options for teens out there.

Best teen bank options