How old do you have to be to get a credit card in Canada?
Before we dig into the best age to get a first credit card, we need to consider the rules and requirements. Here in Canada, you must be the age of majority in your home province to be able to apply for your own credit card. Depending on where you live, that’s either age 18 or 19.
Younger Canadians, however, can be an authorized user on a parent or guardian’s credit card. The age for being an authorized user varies depending on the credit card. Usually, the minimum age is between 13 and 16. Keep in mind, not all credit cards allow authorized users to be added on. It’s also worth noting that the adult is held responsible for the teen’s credit card. Any late payments or outstanding balances reflect back on the main cardholder. Similarly, any poor spending habits on the adult’s credit card will reflect on the minor’s credit score as well. These are both important factors to consider when determining if you want to add a teenager as an authorized user to your credit card.
Why you should start early
Getting a credit card can be a big financial responsibility, but it’s worth your while to start building your credit as soon as possible. Building credit is harder when you are young. Since young adults aren’t very likely to be taking out loans, having and using a credit card responsibly is the best way to do this.
There are a number of benefits in starting to build credit as early as possible. For starters, it’s important for teens and young adults to understand what a credit score is and how it works, especially if they’re perhaps looking to move out on their own and join the workforce. Many landlords and employers will check your credit history before they rent or hire you. By starting to build credit early, you are setting yourself up to make things easier for opportunities down the road.
Positives and negatives of getting a credit card when you’re young
There are pros and cons to getting a credit card right away when you turn 18. In the end, it’s a very individual decision but here are a few things to consider when determining if you’re ready or not.
- Helps build credit early
- Helps teach and enforce financial responsibility including budgeting
- Credit cards are ideal to have on hand for emergencies
- Easy to misuse
- Can lead to poor credit if not used properly
- Can lead to credit card debt
Things to be careful of
Of course, while getting a credit card early can be hugely beneficial in terms of helping you build credit, it can also have the opposite effect if you don’t use the credit card properly.
Starting early, if you aren’t ready and finically aware enough to properly use a credit card, can set you up for failure. Not only can it lead you into credit card debt, but the inability to pay your bills on time will have a negative impact on your credit score.
If you are unsure whether or not you can handle the responsibility of a credit card right away (i.e.: if you are unemployed or have poor money management skills), then it’s best to wait until you are confident that you can manage payments on time. If you don’t, you just risk damaging your credit score which can take a lot of work to build back up.
How to choose your card
Once you decide you are ready for your first credit card, you need to know how to choose the right one for you. But where do you start? There are several things to take into consideration when choosing your first credit card.
Minimum income requirements
The credit card you can apply for will depend on your income. There are several cards out there that have no minimum income requirements, but the majority of credit cards in Canada do. This could be an annual salary of $12,000 but in other cases, it could also be $100,000. It all depends on the card. As a general rule of thumb, the more upscale cards with higher annual fees and lots of perks and benefits tend to require a higher income. If you apply at the age of 18, chances are you aren’t making much money yet, so look for cards with no or low income requirements.
You’ll need to account for your credit score. High-end credit cards will need better credit scores (another reason to start building credit early and responsibly!). As a first time credit card-holder, you likely won’t qualify for these cards as you are just starting to build credit.
If you are a student, you should look at student credit cards, which are designed to help young adults build credit. If you are not a student, you can look at no-fee credit cards which typically target beginners as well.
Be mindful of the annual fee charged by the credit card. It’s easy to get caught up in the idea of fancier credit cards with perks and benefits but those often come with higher annual fees. If you won’t have the opportunity to take advantage of all the perks anyway, the annual fee is just a waste of money. For those just starting out, you are best to consider a card with no annual fee or a very low annual fee.
Perks and benefits
As a new credit card-holder, you aren’t going to end up with a top-of-the-line credit card with all the bells and whistles. That doesn’t mean that you can’t take advantage of a few credit card perks. There are several Canadian credit cards on the market that target beginners but still offer some perks.
Consider what will be the most useful to you right now as a young adult. Sure the idea of collecting points for travel seems great, but are you likely to spend enough on your card to earn a lot? And are you going to use them anytime soon? Probably not. On the other hand, you may need to buy your own groceries, so earning cash back could help with your more immediate needs. Think of what can best help you now. You can always change or apply for another credit card in the future.
From a financial standpoint, getting and using a credit card as soon as possible is ideal as it helps you build up your credit. However, that’s only if you’re at a place in your life where you can use it responsibly. This means paying off the full balances on time every month. If you can manage this, then you can consider getting one right away. If you aren’t sure you can commit to the responsibility, then wait until you can or you’ll end up doing more harm than good.