(MONEY Magazine) – THIS MONTH:

--Grab a home mortgage for 5% or less down. --Beware the index annuity sales pitch.

Sending the kids off to college has always been an anxiety-provoking experience for parents. And now, thanks to Visa, MasterCard, American Express and other companies, there's a new campus peril to keep parents tossing and turning at night: credit-card mania.

Even as card issuers have begun increasing late-payment penalties and tightening lending standards for many customers (see In Your Interest on page 84), they continue to push plastic on college students at schools across the country. And, not surprisingly, given this open invitation to credit, many students get in over their heads. Take Jamie Johnson (pictured at right), a 21-year-old horticulture major at the University of Wisconsin at Madison. As a freshman, she signed up for a Citibank Visa with a 17.9% annual interest rate and the usual beginner's $500 line of credit. By her junior year, she had acquired three more cards--two for retail clothing stores, and a Shell MasterCard. In late 1995, Citibank bumped Jamie's Visa limit to $2,340--and she quickly ran up a $1,500 balance, most of it for a two-week trip to Europe. "I really started to feel uncomfortable about carrying such a large balance," she says. Fortunately, Jamie has been able to repay all but $500 of her Visa debt out of the $200 or so a week she earns as a part-time waitress.

In many ways, Jamie's experience with credit is typical of that of students at thousands of schools nationwide. This year, the proportion of college kids holding at least one major credit card rose to 59%, the highest level since the Roper CollegeTrack market research firm began surveying students in 1991; 20% carry four or more. About two-thirds of student cardholders sign up for a card before their sophomore year. And no wonder. College freshmen receive a bigger rush from Citibank and Discover than from Delta Gamma Gesundheit. On campuses across the nation, the plastic giants entice kids by offering them concert tickets, computer software and discount air fares--just for submitting applications. Some schools, such as Duke University, also earn sizable fees (typically 0.5% to 1% of the amount charged) by lending their names to so-called affinity cards that are marketed to their students and alumni. Says American University assistant professor Robert Manning: "Soliciting credit cards has taken on a carnival atmosphere on college campuses."

Card issuers contend that they encourage kids to use the cards conscientiously. MasterCard, for example, distributes an eight-page pamphlet to students that covers budgeting, financial aid and credit topics. And American Express requires student applicants to sign a statement saying they understand their obligations. Says AmEx spokesman Cathy Cummings: "The vast majority of student cardholders handle their accounts responsibly."

That may be. But issuers certainly make it a breeze for students to qualify for credit. No job? No stable residence? No problem! Most card companies waive the minimum income requirements (typically $15,000 to $25,000 a year) nonstudents must meet; students over 18 don't even need a parent to cosign for the card. Why such eagerness to enlist this less than affluent slice of the population? Simple. Card issuers figure that signing up students will assure them of loyal and lucrative customers for years to come. "Studies show that people hold on to the first cards they get for 10 to 15 years," says Barbara Schulte, vice president of brand development for MasterCard.

Whether students are up to handling the debt they rack up is unclear. Card companies won't divulge precise figures, but they insist that students don't fall behind any more often than adults do. That's not very comforting, though: Today, 3.7% of all credit-card accounts are at least 30 days overdue--the highest level since the American Bankers Association began tracking such delinquencies in 1974. And the anecdotal evidence is disturbing. "Over the past three years, the number of 18- to 22-year-olds coming in for help with their debts has almost doubled," says Lonnie Williams, director of the Consumer Credit Counseling Service of Austin, hometown of the University of Texas. "Some kids take second jobs or even drop out of school to pay off their credit-card bills."

So what can parents do to prevent their kids from becoming a bad credit statistic? To make sure your children know how to use rather than abuse plastic, follow these three tips:

--Teach your children the ABCs of credit. Kids know that plastic can buy them more than they can afford with cash alone, but they often fail to understand the price of that convenience. For example, paying off a $1,200 stereo system over four years at the average rate of 17.18% would add a surprising $467 in interest costs to the price of the sound gear.

--Lay down guidelines for card use. Don't let your kids get into the habit of charging everyday expenses. Instead, counsel them to limit card use to big-ticket items like a $90 tome the professor placed on the reading list at the last minute or emergencies, such as air fare home in a crisis. One parent's rule of thumb: "If you can eat it or drink it, it isn't an emergency."

--Let your kid practice with one of your cards. Have your card company issue a card to your child in his name. Make him pay for whatever he charges (the bills will still come to you), and monitor his spending. After he's shown that he can handle a card responsibly, help him apply for his own card. By shielding your kid from the campus plastic pandemonium, you can make sure he chooses a card with no or a low annual fee and a rate lower than the 17.18% national average. And you'll be teaching your child one of the most important lessons about credit: How to grab it at the best possible price.