Sigma Pi Fraternity International

Credit cards were originally designed for people with incomes, but these days, plastic is almost being handed out on some campuses, and that means some students could be handing over their financial future before they even start their career.

According to the student loan servicer Nellie Mae, 78 percent of college students have plastic by the time they get their diploma, and 32 percent of them have four or more credit cards.

The average student leaves college with more than $2,700 in credit card debt. That's separate from any college loans they may have.

Question - How can I effectively warn my son, who's heading to college soon, about the dangers of credit card debt?

Answer - Here's what we might say to him:

College can be great. No parents nagging you with curfews. You can eat ice cream for breakfast and popcorn for dinner. And, best of all, America's banks keep offering you credit cards!

Fast-forward to your graduation. You've racked up $5,000 in debt on your card. Are you worried? Naaaah. Your minimum monthly payment is only 2% of your balance -- just $100 per month. Consider a few things, though. When you signed up for the card, it offered that low 6.9% interest rate. But, you did notice, didn't you, that the rate swelled to 18% after six months? Sneaky devils, those card companies.

Now, even if you don't accumulate any more debt, it can take you more than 40 years to pay off the balance if you just make minimum payments. Holy guacamole! All told, you will have paid nearly $18,000 just for the privilege of charging $5,000. No wonder the banks keep sending you unsolicited credit card applications.

Here's another danger. Let's say that you're fired up to invest in stocks, but you still owe that $5,000, paying 18% annual interest on it. If your $5,000 stock investment nets you an 11% return, you're still losing money -- 11% in, 18% out. Investing doesn't work well if you're deep in debt at high interest rates.

Don't worry, though. We're not going to tell you to use credit cards only as shoehorns, eye patches, and after-dinner snacks. It's OK to have a credit card. Just make sure that you're only charging what you can afford to pay, and that you pay the bills off in full each month. Choose your cards carefully, using an electron microscope to read the fine print. Look for a low interest rate; no annual fee; no unreasonable penalties; and a protected, interest-free grace period. Then, when the bill arrives, take five minutes and scrutinize your statement for mysterious charges.

Finally, if you find it difficult to manage a revolving-debt card, consider getting the type of charge card that requires full payment each month -- like an old-fashioned American Express card.

Sigma Pi would like to thank The Motley Fool (www.fool.com) who provided the information used in the creation of this webpage.