NEW YORK -- In the midst of the worst economic times in years, many of today's college students are turning to credit cards to finance their college education, using them for everything from everyday necessities to books and tuition. But now more than ever, students need to resist the temptation to use their credit cards to make up for the lack of cash in their wallets, according to the Insurance Information Institute.

A recent study by Sallie Mae, a leading provider of student loans, shows that students are using their credit cards more and more frequently, and racking up more debt than in years past. According to the study, the average undergraduate carried $3,173 in credit card debt in 2008. College seniors graduated with an average of $4,138 in credit card debt, up 44 percent from 2004.

"This year, college students are going to find it much harder to make ends meet because everything is more expensive and interest rates on credit cards have gone up. If they're not careful, by the end of the year, many students will have dug themselves into a financial hole that will be very hard to get out of," said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the III.

Eighty-four percent of all incoming freshman have a credit card when they arrive on campus, and most undergraduate students will have four or more cards by the time they graduate, according to Sallie Mae.

"A person's credit history begins with a first credit card," said Sally Greenberg, executive director of the National Consumers League. "Most young people are surprised to learn that their credit history will affect them in a myriad of ways, including the ability to rent an apartment, finance the purchase of a car, insurance, even when applying for a job."

Parents and students need to work together to develop a financial plan for college. Specific educational expenses, including tuition, room and board, books and fees, can be viewed as "good debt" and can be covered through student loans, grants and the like. Day-to-day college expenses, including personal needs, transportation costs, telephone and other incidentals, are the types of expenses that students should not charge on credit cards.

"In most cases, college is the first opportunity for young people to make independent financial judgments," Salvatore said. "Carrying high, unpaid balances is one of the quickest ways to incur too much debt and fall behind in payments. If college students plan to use a credit card regularly, they should have limits and know ahead of time where the money will come from to pay the bill at the end of the month."

When deciding on a credit card, students should read the fine print and shop around for the best terms. Look for cards that have an annual percentage rate at or below 15 percent, offer a grace period of at least 25 days and feature no annual fee.

To develop good financial habits, the III suggests that students plan and stick to a budget, pay bills on time, use credit responsibly and keep in touch with creditors.

What can you do to improve your credit score if it has been damaged?

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Do not pay someone to "fix" your credit history.

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Create a plan to improve your credit over time.

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Do not max-out your credit limit.

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Limit the number of new credit accounts you apply for.

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In addition to the number of cards, the limits and the amount you use them, it is also important to consider the APRs of the cards you are using.

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Consider credit counseling.

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You have the right to dispute any information in your credit report. By law, the credit reporting agency must provide you with a free copy of your credit report and must correct inaccurate or incomplete information at no charge to you. The three national credit reporting agencies are:

-- Equifax, equifax.com, 1-800-685-1111

-- Experian, experian.com, 1-888-397-3742

-- TransUnion, transunion.com, 1-800-888-4213

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The III is a nonprofit, communications organization supported by the insurance industry.

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