Credit cards 101

American college students are swimming in a sea of credit card debt. Despite the CARD Act of 2009, which tightened laws on credit card companies that were doling out cards like candy to every college student on campus, a recent study shows that 70 percent of college students have credit cards. More than 90 percent of those students are carrying a monthly balance. Between 2004 and 2009, the average student credit card debt jumped from $946 to more than $4,100.

While the law now requires anyone under age 21 to have a co-signer on a credit card application unless they can show proof of adequate income, students need to be smart about credit, says the Minnesota Society of Certified Public Accountants. The on-campus credit card offers are tempting and may seem like free money, but they can spell disaster. Used correctly, credit cards can help build a solid credit report. Used incorrectly, credit cards can leave students with a financial burden that can last long after graduation.

Top 10 tips for students

1. Read the fine print. Get out your magnifying glass and read all of the little words at the bottom of the credit card application before you sign anything.

2. Understand the APR (annual percent rate of interest). When you read the fine print, you'll see the APR the card will charge you on the balance if the full amount owed isn't paid on or before the due date each month. You want the lowest interest rate you can find just in case you do ever need to carry a balance and end up paying interest. The average rate is currently hovering just under 15 percent, but there may be lower offers. Shop around.

3. Beware of the fees. Credit card companies may or may not charge you an annual fee simply for having their credit card in your wallet. You may be signing up for a card with a fee of $50, $75 or even more per year. Again, shop around for the best deal. Rewards cards offering airline miles or cash back can be useful and help your money work for you, but these cards may also have more expensive annual fees. Make sure the reward is worth what you're spending in fees.

4. Don't carry a balance. Pay your balance off when your statement arrives each month. Only paying the minimum each month can be a recipe for financial disaster. If you carry over a monthly balance, you're looking for trouble.

5. Know your limits. A higher credit limit may help your credit score over time, but if you're concerned about your spending habits, request a lower limit for now. You can request to have the limit raised in the future.

6. Understand the grace period. The Credit CARD Act of 2009 requires credit card issuers to offer at least a 21-day grace period, during which you are allowed to pay your credit card bill without having to pay interest. The grace period usually applies only to new purchases. Most credit cards do not give a grace period for cash advances and balance transfers.

7. Pay on time. Get your payment in by the due date or you'll be slapped with late fees on top of interest charges.

8. Don't get carried away. Once you're approved for your new credit card, offers are going to start rolling in for even more credit cards. These cards may have low introductory interest rates and fees that skyrocket down the road. Don't be tempted. Too many credit cards can adversely affect your credit rating.

9. Set limits. Decide how much you can afford to pay each month and stick to that as your spending budget. Plan to pay your credit card balance in full each month.

10. Don't let debt pile up. If you find yourself getting in over your head and your monthly balance growing instead of shrinking, get it under control right away. Develop a plan to pay the balance off, and stop spending until you do.

Choosing and using a credit card is something parents and students should sit down and discuss, according to the Minnesota Society for Certified Public Accountants. Set spending limits and help your child understand the importance of good credit. Decisions concerning these matters will have a profound effect on the student's financial success far into the future.