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Fewer millennials are carrying a credit card these days, according to a recent poll by website Bank Rate. The American survey, which telephone polled 1,161 adults, found 63% of those under 30 do not have a card. While these findings are affected by south-of-the-border legislation that limits credit card options for those under 21, it was also found that debt averstion - aka the fear of falling into a debt hole - is growing among this age group.

In Canada, however, where primary cardholders need only be 18 years of age, college campuses are rife with credit card kiosks, with some campuses in exclusivity deals with lenders. It takes only a stroll through the student centre for a freshman to be offered a credit card application. They should certainly proceed with caution - but should they say no? The consequences of poor credit habits, especially at an early age, are costly and long-lasting. But avoiding credit cards altogether could do students a disservice; it is at this time when responsible debt habits create a credit history and pave the way for mortgage qualification, insurance and other forms of borrowing down the road. For someone with limited job and income experience, credit cards are often the easiest way to build this history, especially as cards marketed to students take earning shortfalls into account. So, should students sign on the dotted plastic line? Yes… but only if they adhere to the golden rules of credit.

Rule 1: Don’t go for the first card offered to you

Those on-campus kiosks pack a pretty sweet deal - extra funds and a free t-shirt? It’s no wonder students are clamouring to apply. But it’s a mistake to commit to a card without knowing your other options - and there’s a good chance that first card doesn't have the most competitive interest rate, fee structure, or high-value rewards. Do your research first, and compare the market!

Rule 2: Don’t carry a balance - ever

If nothing else, stick to this rule, and always pay your monthly balance in full. Not only will revolving, high-interest debt wipe out any rewards you may be earning, but it can derail your entire student loan repayment plan. Students are already leveraged to the hilt with debt (our Cost of the Future study found the average university student away from home to owe $78,187 with a 14-year payoff timeline). Adding uncontrolled, high-interest debt without a set payoff plan can push tuition payments well into one’s 30s - when former students would rather be saving for a home purchase or retirement.

Rule 3: Be smart about rewards

Students must be especially selective about their financial tools; earning the wrong type of credit card rewards can actually be harmful, financially. For example, carrying a travel rewards credit card - one of the most expensive types of plastic - when you’re not likely to be vacationing any time soon is a faux pas when one could be earning cash towards future purchases or their balance instead. Look for rewards that support your spending habits - and aren’t saddled with an annual fee.

4: Don’t use cash advance features

In a pinch and need some cash? Whatever you do, DON’T turn to the cash advance feature offered by your credit card. These transactions waive the usual grace period - the amount of time before a purchase incurs interest - meaning you could pay upwards of 20% interest on that cash amount right away. That’s the priciest loan around! Seek out your lender, the bank of mom and dad, savings, anything - just avoid paying that steep rate.

Rule 5: Don’t let your card replace your emergency savings fund

Thinking you’ll keep your card around “just in case”? It might seem a responsible approach, but having to use it in such a circumstance comes with the same debt consequences as frivolous spending. While saving any amount may seem impossible for cash strapped students, any little bit helps - especially when amped up with a GIC or within a TFSA.

Penelope Graham

A first-time homeowner and newbie investor, Penelope Graham is the quintessential millennial, navigating the world of personal finance and wealth management. A self-professed monetary policy nerd, she follows the often-controversial housing market closely and specializes in mortgage, credit card and personal finance news.

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