Credit Card Frustrations (for people under 21)

There is a lot of advice about credit cards out there.  While I could give the same advice all over again, I want to cover a different issue that I haven’t seen covered nearly as much, getting a credit card as an under 21 college student.  The thing is, most of the people giving advice are making assumptions that aren’t true.  They are either assuming that, A, things are the same as when they were this age, or B, they are assuming that age couldn’t possibly have anything to do with it.  In this post, I’ll tell you about the barriers that I’ve run into, and what I’m doing to get around them.

First, let’s cover this story that every old person tells you about credit cards in college.  They say that there are going credit card issuers all over campus giving you free stuff to sign up for their credit card.  I saw nothing like this, and it turns out that I shouldn’t have, because in 2009 the CARD act was put into place with a whole load of restrictions on how credit card issuers do business with people under 21.  While I’m not a huge fan of people trying to sell me stuff while I’m walking to class, I am incredibly frustrated at how hard this has made it to get a credit card.

Now let’s answer the question as to whether I actually need a credit card.  If the idea behind this law is to prevent young people from making stupid decisions, could I be making one by trying to get a credit card?  People tend to jump to the conclusion that an eighteen year old would only want to use a credit card to buy things that he can’t afford.  I can come up with four other reasons why a credit card is useful that do not involve incurring interest penalties.

1. Credit Building

This was the main motivating factor for me.  While I do not need to borrow money now, my credit report will have a huge impact on the interest rate of any money I borrow in the future.  Additionally, credit reports are used for many things other than borrowing money.  Potential employers and landlords often use this in their decision making process.

2. Insurance/Purchase Protection

Young people buy stuff that can benefit from this too.

3. To help with cash flow

I don’t want to suggest that it is a good thing to regularly rely on credit cards for emergencies.  I like the idea of having an emergency fund.  However, I like to keep mine in an online savings account.  If something comes up that exceeds the amount in my checking account, I can’t just put it on my debit card.  In this situation, having the credit card buys me the two or three days I need for the bank transfer to go through.

4. Cashback

I will admit that at this point my expenses are pretty low, and thus the dollar value of these rewards isn’t very high for me.  However, every place that accepts a credit card has the extra credit card fees built into the price, so it seems silly to throw this away by paying cash.

Now that I’ve established that a young person could want a credit card for responsible reasons, let’s talk about my struggle in getting one.  I didn’t really know where to begin, so I tried to follow what little advice I had.  I had heard it is easier to get approved for a card from a bank you have an account with.  So I applied (the particular bank doesn’t matter, because it’s the same situation across the board because of government regulation).  I got denied immediately, and a week later received a letter in the mail detailing why I had been denied.  Of course the letter listed the obvious reasons: length of accounts and number of accounts.  However, what got my attention was that they listed my credit score, which was in the high 700s.  To explain this I’ll have to give a few more details about my situation.  Before I went to college, my dad added me as an authorized user to one of his credit cards.  He gave me the card and I use it for things we have arranged ahead of time.  After getting my credit report for free online, I determined that the payments for this card were showing up on my credit report.  It should also be noted that the account opened date was before I was born, so that’s interesting.  The only other thing listed on my credit report was the inquiries I had made for several cards.

This is the thing that makes finding cards to apply for very difficult.  Every search tool out there bases what credit cards you should be eligible for one your credit score.  With a high 700’s, the tools claim I am eligible for almost anything, but when I apply to what are supposedly the easiest to get, I am denied.  This means that credit card companies are taking something else into account when they deny me.  I speculate that it could be one of two things.  One could be that they have other criteria for whether someone is approved.  Another might be that they don’t want to deal with the government regulations regarding giving credit cards to young people.

So what did I do about this?  Well, it was clearly that I couldn’t get any unsecured credit cards.  One of my banks actually suggested that I get their secured card.  I liked the idea, but their card charged an annual fee.  So I looked elsewhere.  I decided to get a Discover It Secured Card.  Before you go and sign up, make sure that you get some kind of bonus for doing this.  I unfortunately missed out on this.  Through their referral program, both people get $50, which ultimately gets doubled due to the first year double cashback bonus.  You can either find a friend who has a card and you would like to help out, or you can use my link: The main reason why I chose the Discover card is because it does not charge an annual fee, and it can graduate to an unsecured card.  You also get some amount of cashback, although it isn’t as good as some of Discover’s other cards.  You also get to set the amount you put as deposit.  When deciding how much to put down, I had two theories in mind.  One was that the amount of I put down for the deposit would be how much I got as unsecured when the card graduated, so I wanted to put as much as possible.  On the other hand, I didn’t want to put too much and delay them from graduating my card because it was too risky.  I still don’t know for sure whether this card will graduate in a reasonable amount of time.

I’m sorry that I don’t have a solution.  It seems like this is one of those things that isn’t going to change any time soon.  It is incredibly frustrating to be told you’re an adult, but there are going to be a few exceptions until you get past 25.  Let me know how you feel in the comments.