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Students urged to use credit cards with caution

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Students won't be the only ones flocking to university campuses in a few weeks.

Kiosks promoting various student-branded credit cards have become a ubiquitous sight during many orientation week festivities, often waving free T-shirts and other swag to help lure potential customers.

While credit cards can provide a certain degree of security and flexibility for students, experts say there's a lot young adults need to know before they get into plastic. (Learn how to teach your child good credit management in Raise a money-smart kid.)

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Janet Peddigrew, a Bank of Montreal district vice-president, is getting her 17-year-old son ready for his first year of engineering at Memorial University in St. John's. When he goes, he'll be taking his credit card with him.

"We've talked to him about how to make your payments, how important it is to not abuse the limit but also establish a good credit rating," said Ms. Peddigrew.

"As a parent, it does give me some comfort that he won't be stuck if he can't get hold of us. There is something there that he can access to get money if need be."

The card has a small limit, has no fees and has the added perk of being connected to his Student Price Card, which can get 10 to 15-per-cent discounts on anything from pizza to clothing.

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Michelle Duke, head of client strategy with Royal Bank of Canada, said students need to understand what purpose a credit card serves before they sign up for one.

"Credit cards are there for purchases that can be paid off on a monthly basis," she said.

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"It's not to carry credit card debt, because it's an expensive way to carry debt and you certainly don't want to fund your education costs with a credit card."

Parents can arrange for their children to have a "family card," in which the kid gets a slice of the family's total credit limit.

Essentially that means the student would have his or her own card, with its own separate number, but mom and dad would still be the ones calling the shots.

"It gives the student access to a credit card, but it also keeps them living within certain parameters," Ms. Duke said.

Dave Molenhuis, chairman for the Canadian Federation of Students, said he's wary of the credit card companies that set up shop on university campuses.

Students often find themselves in tough financial situations throughout the school year as they struggle to pay extra costs associated with their education.

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"They are in need and are often talked into getting a credit card thinking that it's something they can use and will be able to climb out of it," said Mr. Molenhuis.

"But it's not always the case. It's a dangerous thing."

It's better for students to sit down with a parent or financial adviser and thoroughly consider all options.

"That's not the kind of service you're getting at a kiosk, where they're usually handing out gifts as an incentive to sign up right on the spot," he said.

"There really isn't time to read the fine print and consider all of the options out there. That's really not the kind of situation that we want people with needs getting into."

Mr. Molenhuis adds many campus financial aid administrators can offer emergency bursaries for students in a bind. Student unions can sometimes act on their behalf, too. (For help finding student financial assistance, read Show me the money.)

"That's probably the best place to start, rather than thinking you should carry it all on your own shoulders and just get a first credit card if you don't have one, or a second one if you do."

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