You would never let junior drive a car without a driver’s license. But have you ever thought about the risks involved in letting him cruise through college with one or more credit cards in his wallet?

Credit cards are a fact of student life these days. And while it’s easy to assume that kids graduate from high school with some basic financial literacy skills, this is for the most part not the case. According to the Jump$tart Coalition for Personal Financial Literacy, the average high school graduate lacks even basic financial management skills, such as keeping a balanced budget and saving for retirement. In some cases, high schoolers graduate without even knowing how to balance a check book.

The #1 credit card mistake parents make is to not realize that kids need to learn how to use credit cards in the same way as they need to learn how to drive. Come college, your kid will be courted by credit card issuers left and right, and it’s only a matter of time before she ends up with her first credit card. Credit cards are a powerful financial instrument, and student credit cards, unfortunately, often land kids in a heap of trouble. Without proper preparation, many young adults are left to muddle through on their own and easily end up with bad financial management habits.

The new credit card legislation, which steps into effect in early 2010, gives new power to parents by requiring young adults under 21 to get a co-signer (which in most cases will mean mom or dad) when they apply for a credit card. This offers some protection by making it harder for students to sign up indiscriminately for credit cards. However, the new law will only have its full effect if parents get proactive about getting involved in their child’s financial education.

According to the 2009 Consumer Financial Literacy Survey by the National Foundation for Credit Counseling, more than one third of the people surveyed said that their most important source of personal finance education was their parents. Only 9 percent of the people surveyed said they learned what they know about financial management in school.

In short, in most cases it’s up to parents to teach the financial management skills that many high school graduates are lacking. There is a lot to know about managing personal finances, particularly as the financial climate is getting increasingly complicated. Moreover, financial management isn’t just about knowledge, it’s about helping your kids adopt certain behaviors and habits which will serve them over the long run, rather than gradually undermine their financial health.

So which is the best way to teach your kids about credit cards? Take the bull by its horn. Get your kids a credit card early, while they are still living at home (and you’re the one paying the bills). Use the credit card as an opportunity to show how easy it is to overcharge and spend more than one intended with credit cards. Help your kids understand the pitfalls of paying only the minimum monthly payment. Teach them good habits of credit card usage by requiring them to pay off the balance in full each month. Show them how to keep track of charges, so they don’t get shocked when they get their statement at the end of the month. You can even use the credit card as a platform to teach basic money management skills, including the importance of keeping a good credit rating and paying bills on time.

Once your kids get to college, the pressure will be on mom and dad to co-sign for a credit card. Unfortunately, by then you’ll have little control over how the credit card will be used. So with kids and credit cards, go by the old adage: a stitch in time saves nine.

For most kids, college is the first step into the world of adults, the first time they “escape” parental control and take charge of their own finances and choices. College is a great learning experience in many ways, but for many students it’s also the place where they make their first big, financial stumble-using a credit card to bury themselves in debt.

According to an annual survey conducted by Sallie Mae, the average credit card debt of all college students in 2007-2008 was $3,173. The higher the grade level, however, the higher the credit card debt—the average credit card debt of freshmen was $2,038, compared to $4,138 for seniors.

College students get into credit card debt for many reasons. According to Sallie Mae, in one survey, 92% of students said they use their credit card to cover shortfalls, including paying educational expenses like textbooks or even tuition. Credit cards, of course, also make it easy to overspend—charging items one would otherwise not be able to afford. No matter the purpose of the charges, however, the majority of college students don’t have the income to pay down the balance on their credit cards.

Student credit cards, at the same time, offer numerous benefits as well. Apart from the convenience they afford, they can help you establish a credit history, giving you a head start when you graduate from college and have to apply for a job, rent a home, or when needing a car loan or a mortgage. To take advantage of the benefits of credit cards and avoid making the most common student credit card mistakes, follow these few simple rules:

1. Never pay just the minimum due

Paying only the minimum monthly payment is a trap that’s very easy to fall into when you’re just starting out using credit cards. Paying the minimum due is very expensive. Particularly for credit cards with a high APR, you’ll end up paying off the original balance several times over, if you pay just the minimum due. Take a moment and use this easy credit card calculator to see just how expensive it would be to pay your credit card balance off with only the minimum payment due every month.

2. Set a goal to pay the balance off in full each month.

One of the main problems with using a credit card is that it doesn’t seem like spending money. You don’t have to have the money upfront to pay for something you want, so there’s not that same pain of paying as you have with cash. This makes it all too tempting to just whip out your credit card and make that purchase. The less you pay on the card each month, the more you continue to defer the pain of paying. After all, if the card balance is $1,500, but you only pay $50, it doesn’t seem so bad.

As an antidote, set a goal to pay the bill off each month. Knowing that you have to pay the bill in full each month will force you to think about whether or not you can really afford that purchase after all. Of course, there will be times when you make a purchase that you cannot pay off in full when the bill comes in. In that case, have a plan in place to make two to three payments over the next few months to pay the debt off.

3. Keep track of all your charges

With credit cards, it’s all too easy to spend more than you realize, simply because most of us don’t keep track of our charges. To avoid this trap, write down every charge you make on all your credit cards, including regularly recurring charges. Add them up as you go in the same way a you would balance your checking account. This is the easiest way to make sure that you stay within the limits of what you can afford to pay off at the end of the month.

Managing credit cards is not rocket science—it’s mainly a matter of establishing a few good habits. If you follow these simple rules through college, you’re much more likely to be among the minority of students who can pride themselves in graduating without any credit card debt.

Stepmoms aren’t all evil. On the contrary, Annie Flannigan of Fairfield, Iowa is here to report, they can be—like, cool. When Annie was 14, her stepmom made her an additional card holder on her account and set her loose with her very own credit card, albeit with certain rules and conditions. Annie couldn’t charge more on the card than she could pay off each month with her allowance and the money she made from baby-sitting.

Of course, Annie charged more to her card than she could pay off several times. But with her stepmom’s help, she quickly learned from her mistakes. Today she’s a senior in college and unlike many of her peers, her credit card debt is—zippo.

Annie was fortunate. Her parents early on put a structure in place to help her learn basic credit card management skills. Heather Williams was not so lucky. Like so many others, Heather got her first student credit card while a sophomore in college, when she got an “an offer she couldn’t refuse.” Heather knew little about credit cards, but she quickly became a plastic aficionado. Using credit cards was much more convenient than having to carry around cash or writing checks. Credit card charges didn’t bounce, and using her card just made it easier to have enough money for everything.

Soon Heather charged a great deal of her expenses to her credit card. As the balance started to creep up, she took out another one. The debt ticked up so slowly she barely noticed it—her monthly minimum payment was still comfortably within an affordable range.

Then she lost her regular afternoon job at a local grocery store. Now, without her regular cash flow, her credit cards suddenly became a means of paying for basics like food, gas, or utilities. The debt snowballed, and before she knew it, she was more than ten thousand dollars in debt. Without her job, even the monthly credit card payments became an issue, and Heather eventually defaulted on her credit card debt—again not having any idea what that would mean for her over the long term. Now, at only 26, her credit rating is shot. To fill out just a rental application, she has to put her boyfriend as co-signer on the application, fearing that she will otherwise be declined because of her bad credit.

Unfortunately, Heather’s situation is far more common than Annie’s. Students’ use of credit cards has long been a source of concern, and according to a new report from student lending giant Sallie Mae, it’s only getting worse. Nationwide, more students are using credit cards to pay for expenses, including college tuition. According to the new report, released in April of 2009, student credit card debt has reached record heights, with undergraduates carrying an average of $3,173 in credit card debt and graduating seniors more than $4,100. While many students use credit cards to pay for increasing college tuition expenses and textbooks, about 70% report that they are also relying on plastic for extras like going out for a nice dinner, clothing, and other non-essentials.

Worse, most students are not paying off their credit cards. According to the report, only 17% of students surveyed say that they’re regularly paying off their balance in full, and a full 40 percent always carried a balance forward from month to month. Around 60 percent were surprised at their escalating credit card balance; 40 percent reported charging items, despite knowing that they didn’t have the money to pay off the charges when their credit card bill arrived.

For kids, the difference between sink or swim often boils down to the money management skills they learn before they leave home. Many students arrive at college campuses with little knowledge of what is involved in managing a credit card. Few have any knowledge of concepts like credit rating and credit history, nor of the long-term consequences of racking up excessive credit card debt or defaulting on debt. Most have no idea of how expensive it is to pay off a credit card balance paying only the minimum monthly payment, or how easy it is to get trapped by credit card debt with sky-high default interest rates.

Being bogged down by an overwhelming debt load is a terrible way to start out life. Unfortunately, between student loans and credit card debt, this is the reality for an increasing amount of our nation’s young adults. Parents can make a big difference by teaching their kids basic credit card skills early on. While the idea of letting junior loose with a credit card may not be appealing, you’re better off having your child make mistakes on your watch rather than later down the road.

A high credit score will give you countless advantages later in life. Your credit score determines how easy it will be for you to get a loan and what terms and interest rate you will be offered. It even influences how much you will pay for your car insurance.

A low credit score limits your financial options considerably, and it can be a source of much distress, while a high score gives you tremendous financial flexibility. In short, your credit rating will have tremendous impact on your future financial life.

Your credit rating is built up over time, and it is based on your payment history and how well you have managed credit in the past. To establish a good credit rating, use your student credit card wisely. Always make payments on time and never exceed your credit limit. Don’t let your outstanding balance build up and, as much as possible, pay the balance off each month.

The financial decisions you make while in college will have a long-lasting impact on your future. Managing a credit card well provides a great introduction to how credit works, how to use it to your advantage, and how to avoid the mistakes many people are apt to make when using credit cards.

When researching reward credit cards, look for the card that offers the best incentives on purchases you frequently make. Some cards, such as Citi® mtvU™ Platinum Select® Visa® Card for College Students, awards you a full five points (roughly equivalent to a 5% cash back) on charges made in restaurants, bookstores, record stores, video rentals and movie theaters and one point for other purchases. You also get rewarded for getting good grades (up to 2,000 points a year) and for paying your credit card bill on time. Points can be redeemed for gift cards, CDs, airline tickets, or tickets to the MTV Music Video awards.

If earning a straight cash back on purchases sounds more appealing to you, check out cards like the Discover® Student Card, which gives a 5% cash back in popular categories that change four times a year, like travel, clothing stores, movies, and department stores, and 1% cash back on all other purchases.

To determine which card best fits your needs, look at your spending patterns and which type of rewards you prefer to earn. Remember that if you will be carrying a balance, you may be better off looking for the student credit card with the lowest APR.

1. What is the APR (Annual Percentage Rate) charged on the card? Most student credit cards come with great 0% APR introductory offers, but these typically expire in as little as six months. While it’s best to pay your card off in full every month, many students find that they do carry a balance. If that is likely to be the case for you, pick a card with a low annual percentage rate (APR). It’s not uncommon for interest rates to vary from 12.04% to 18.05%, so you will save quite a bit over the long term by going with the card with the lowest interest rate.

2. What is the introductory offer? Some cards offer a 0% APR for balance transfers, some a 0% APR on purchases, and a few offer this rate on purchases, balance transfers, and cash advances. If you have a balance on another card you may wish to transfer it to a new card. Think about how you mainly will be using the card—for purchases, or make a balance transfer from another card. Then choose the card that best fits your needs. As always, it’s prudent financial sense to take cash advances only in an emergency.

3. Which other benefits does the card offer? Many credit cards award you additional benefits, such as cash back or reward points on purchases. These can accumulate into additional perks over time. Again, choose the rewards that best match your interests.

4. Is the APR a fixed rate or a variable rate? Many credit cards come with a variable rate APR, which means that the APR is linked to a financial index. The rate will go up or down as this economic indicator changes, raising or lowering the interest rate on your account. A fixed rate will not change with the financial markets.

5. What are the penalty fees? What are the penalty fees for making a late payment or exceeding the credit limit on the card? Read the Terms and Conditions carefully in order to understand the charges and your responsibilities as an accountholder.

6. What is the default rate and what triggers it? If you are late on a payment or miss a payment altogether, credit card issuers reserve the right to convert your standard APR to a higher default rate. Default rates typically are exceptionally high, often in excess of 30%. Some agreements also let card issuers raise the rate if you default on another loan. Read the fine print to find out what would trigger a default on the card agreement and be sure to avoid any actions that would cause you to be in default.

Many student credit cards offer cutting-edge benefits very similar to those of non-student cards. With so many offers available, it’s worthwhile to do a little homework to get the card that best suits your needs. Don’t just respond to the first offer you come across, but take some time to educate yourself on how to choose the student credit card that is best for you.

Getting a student credit card is not simply a great convenience, but also an important step in building a solid foundation for your financial future. When used wisely, a credit card will help you acquire financial management skills. In addition, as long as you stay regular with your payments, a credit card will enable you to build a good credit history, which will benefit you in numerous ways when you graduate from college. To learn more about student credit cards and the key role they play in your long-term financial planning, click on the links below. To find a selection of top-rated student credit cards, click here.

• How to Choose The Student Credit Card That Is Right for You
• Maximize Benefits With A Reward Student Credit Card
• Building A Solid Credit History With A Student Credit Card