It’s no secret that college graduates are facing an uphill battle these days, unless you have an in-demand major such as accounting, engineering or computer science — in which case, you’re set.
Outstanding student loan debt has nearly doubled since 2007 and now sits at about $1.2 trillion. The unemployment rate for recent college graduates is still around 8 percent, compared to about 7 percent for the general population. And the U.S. ranks second to last in the world in terms of parents’ perception of their kids’ money management skills, according to Visa’s International Financial Literacy Barometer 2012.
Although a college education continues to provide a solid return on investment, students must be ready to put their best foot forward when entering the “real world.” That means you should begin using credit as soon as possible and contemplate a move to a new city. Allow me to explain.
Whether you know exactly what a credit score is at this point — let alone where you stand — it’s important that you understand just how critical credit is to adult life. Not only does your credit standing dictate which loans and credit cards you can get approved for, but it also impacts the insurance premiums that you pay, your ability to lease a car or rent an apartment and your odds of being hired for a job that involves a security clearance or the handling of money.
That’s where credit cards enter the picture. While the thought of college kids using credit is enough to give many parents nightmares, credit cards are actually the most efficient credit-building tools available — provided that you use them responsibly. They report account information to the major credit bureaus on a monthly basis, and the information in your resulting credit reports is what credit scores are based on as well as what financial institutions and other decision makers use to evaluate your financial responsibility. As long as you always pay your bill on time and avoid using too much of your available credit, the information in your reports will be positive, and your credit standing will improve. You don’t even need to make purchases with plastic if you don’t want to because simply having an open credit card account that is in good standing will improve your credit.
College students are also in a position to garner unusually impressive card terms, considering their limited income and largely unproven financial track record. Credit card companies understand that a college degree comes with above-average earning potential, while a college student’s youth offers the potential for lifelong use of financial products and a lot of resulting revenue.
For example, the BankAmericard Cash Rewards Credit Card for Students offers 3 percent cash back on gas, 2 percent on groceries and 1 percent on everything else. The Journey Student Rewards Credit Card from Capital One offers 1.25 percent cash back across all purchases during months that you pay your bill on time. Opening such a card would therefore help you save on short-term expenses as well as over the long-haul, via a higher credit score.
In addition, employment opportunities are not geographically consistent. Local economies are recovering at different rates from the Great Recession, different areas are dominated by different industries and cost-of-living-adjusted salaries vary widely.
That’s why it’s worth checking out CardHub’s rankings of the best and worst cities for small-business employees. Why small business? Such firms are the biggest non-government job source in the country, employing nearly half of the private workforce and adding more than 60 percent of the new jobs created in the last 20 years, according to the Bureau of Labor Statistics. CardHub therefore compared the 30 largest metropolitan areas in the United States, using 10 different metrics designed to evaluate the current small business job market in each area as well as its growth prospects moving forward.
Three Florida cities — Tampa (9), Miami (11), and Orlando (12) — crack the top 15 in the rankings, but if you are considering a more substantial move, you might want to check out Denver, Boston, Minneapolis, Seattle and San Francisco, which represent the top five cities for small-business employees. Those cities offer relatively high starting salaries, industrial variety and many small-business employers per capita.
On the other side of the coin, places like San Diego, Philadelphia, Sacramento, Riverside and Detroit boast lethargic economic growth, relatively high unemployment and fewer overall options for new entrants to the job market.
At the end of the day, college is about preparing you for the “real world.” You’re supposed to study for a career and learn socialization, but major life skills like money management are too often left off the agenda. You may therefore have to do a bit of independent study to ready your credit score and job applicant profile for the big time.
Odysseas Papadimitriou is the CEO of CardHub.com. A version of this guest column ran on page 7 on 1/22/2014 under the headline "College students: It’s time to start studying for good credit"
