Dear Recent College Graduate: You’re Not That Special!

Hi recent graduate. I thought I should catch you now before it’s too late. First and foremost: congrats on graduating. No really, it is a big deal. According to research, if the world had 100 people you would be part of the 7 that have a college degree.

So since you are presumably still early in your career as an income earner (whether it’s through employment or entrepreneurial pursuits), I thought I should shed some light on a few things that might start happening to you. Speaking from personal experience of course.

By virtue of you being one of the freshest additions to the fat slice of the income group cake, called the middle class, account cards from retail outlets with your name neatly and fabulously printed in metallic letters may start making their way to your mailbox. And a side note, I don’t care how complex your name is, on one of these it will always be spelled correctly- and oh boy it will look good!

Then, as though it were by the assistance of some magic potion sprinkled all over you, your bank will start treating you like you come from the bloodline of royalty. And this was unknown to them for all these years, until of course the day of your graduation. You will now have the direct access to a personal banker among other benefits. And also the offer of another card, containing sums of money that you did not work for available to you, with your name once again lavishly printed in metallic letters. Not forgetting the texts on your phone from other financial institutions- who have also been suddenly made aware of how important you are-offering you similar cards of silver, gold and platinum status. They’ll also be the calls from various other institutions, referring to you by your title, bargaining for your time to elaborate about a product/service or other that they have on offer. And when you try using that ubiquitous “sorry I don’t have the money” excuse; “take it now and pay later”- they will say.

Now if you were a nerd at school like me, you may be flattered by all this attention from all these seemingly important adults who not only know your name and how to spell it correctly (sorry for the over-emphasis on spelling- I’ve been referred to as Cecilia for too long now), but are also very persistent in keeping your attention. Sorry to burst your bubble, but their sudden interest in you has nothing to do with how special you are as your parents most probably told you whilst growing up. See, you my dear friend, by virtue of being a graduate are seen by these as less of a credit risk- so naturally they want to reel you in by lending you credit. It’s nothing sinister really. It’s just business. That’s why I thought I should write you this post, to reveal to you just how ugly things could get if you get reeled in by their charms and over commit yourself with credit too soon.

Now According to NerdWallet the average U.S. household with debt carries $15,762 in credit card debt and $130,922 in total debt. Since not all debt is equal, under the right circumstances, mortgage, student and auto loan debt can help strengthen your financial position. However, credit card debt — and other debt with high interest rates — tends to be unnecessarily costly and should be paid off as soon as possible.

Why do I refer to this situation as ugly? Because of a simple concept called interest. Research from NerdWallet further adds that the average household is paying a total of $6,658 in interest per year. This is 9% of the average household income ($75,591) being spent on interest alone. The average interest rate range on a credit card is approximately 21%. Imagine if you had taken the money you had borrowed from a credit card, not purchased anything with it and put it in a savings account from a commercial bank. The money you invested would only yield a meager interest of approximately 1% per year. So that means even using money gained from credit (in the form of a credit card) to earn you money would not make you enough to pay off the debt that would have accumulated as a result of my infamous friend, called interest working against you in the form of debt. Quite shocking isn’t it. But again, it’s nothing sinister on the credit card company’s part-it’s just business.

Through this minor analysis it should ring to you that beyond the classroom and getting those A’s, in the real world it pays to be a thinking consumer. So be wise: and do not accumulate credit beyond your means as you start out in your financial career. If you can’t afford it, it wouldn’t hurt to wait until you can. Trust me, money is a great slave, but-especially in the form of debt-a terrible master.

Good luck!