College Graduate Advice

Dear recent college grad,

I would like to offer you one significant piece of advice for you as you enter the "real world."  That advice is to never accumulate credit card debt.  Credit card debt is an absolute killer, and a killer to much of our population.  According to an article by NerdWallet, the average American household credit card debt is $7,193.  This is obnoxious.  There should be zero credit card debt across the nation, because you should only use your credit card if you are certain you have the money in your bank to pay the bill.  If you are the average American who owes the previous amount in debt, imagine if you invested that exact amount ($7,193).  See below

If you invested that amount as a current principal, and never added to it for forty years (earned an average of 8.5% per year), you could make yourself almost $200k.  And hear this, if you only look at American households who have debt, the average credit card debt goes up to $15,418!  In total, American consumers owe $852 billion in credit card debt.  Yes, I said billion.  

There is another debt factor in the States even larger than that of credit card debt, and it is student loan debt.  According to projectonstudentdebt.org, the average American who borrowed money for college owes $26,600 in debt.  However, since you are already graduated and cannot retrace your steps and pick a cheaper college, we'll continue to focus on credit cards.  Credit cards can in fact be advantageous.  Many credit card companies offer special bonuses (such as frequent flyer miles), hoping their users will use the card more (to rack up their flyer miles), while falling deeper and deeper into debt.  So yes, credit cards can be great (offer bonuses and safer than carrying around huge sums of cash), but make sure you only use it if you know you have the money in the bank for what you're buying.  

I found an article that gives some great advice on using your credit card (Credit Card Advice).  I suggest you take a look at it.

Here are some key points I picked up from it:

1) If you are planning on traveling a lot internationally, find a credit card without a foreign interaction fee (can be up to 3%).

2) Pay off the balance of your credit card in full every month.

3) You tend to spend more on debit cards than credit cards, more on credit cards than cash, and more with small bills with large bills. So put some large bills in your wallet and take out the credit cards and you are less likely to spend much.  

I hope this advice will help you out, and I wish you the best of luck in your career!

Tucker Erdmann