With tuition rates soaring and student loans harder and harder to come by, the last thing today’s college student needs is a mountain of unsecured credit card debt to add to the pile. According to Nellie Mae, a major student loan corporation, the average college senior now carries over $2800 in credit card debt, and two thirds of today’s college graduates come out with over $20,000 in combined student loan and credit card obligations. Add graduate school to that and the numbers double or even triple.

No Such Thing as a Free T-Shirt
Parents and prospective freshmen should have a serious discussion together about credit cards and debt obligations long before bags are ever packed or dorm rooms assigned. At most state colleges, financial institutions set up booths right at freshmen orientation that offer free t-shirts, food, tickets, and other enticing products if the incoming student merely fills out a credit card application.

High school graduation is not too early to start building good credit. One good way for a college student to establish good credit is to apply for a major credit card and pay the balance off quickly and on time. Use the card moderately, pay on the bills on time, and pay off the balance off in full each and every month instead of just sending in the minimum payment. Be aware that even a single late payment can result in spiked interest rates, penalties, and a poor credit rating.

Why Good Credit is Essential
Aside from the obvious reasons for establishing good credit early (so a student will be able buy a car or a house after graduation, for example) is the trend towards checking the credit scores of job applicants. More and more corporations are requiring a credit check and a drug test before even considering the best of resumes. In today’s job market, a recent graduate can’t afford to start out with anything more than inexperience as a negative. The competition is just too brutal.

Insurance companies now also routinely rank customers by credit score and tier the rates so that the worse the credit the higher the premium. Even if a student has a great driving history, if his or her credit is bad or nonexistent, a home or auto policy could end up costing more. This is especially important for young men, who already pay the highest rates in the auto insurance industry until they pass the age of thirty. Good credit is one of the few factors that can make auto insurance affordable for them.

Explain the Dangers & the Basics too
Make sure your college student knows that 21% is not a good interest rate, that if he or she misses even one payment that interest rate can balloon to nearly 30% with penalties, and that paying the minimum billed out each month will not pay off the balance in any human lifetime. Create an imaginary balance on an imaginary 21% card, and go play with a repayment calculator.

Be aware that many students may need more basic information than even that. For instance, a surprising number of students think that credit cards are ‘free money’; or that whatever they spend using the cards will not have to be repaid until after graduation. If you’ve never had a budget or money discussion with your son or daughter, now is definitely the time.

Related post: See special college credit card offers from Citi.