As students head back to school, the financial industry is ready to greet them – and make more money off them. Credit card companies, banks and lenders are spending big money on advertising and freebies in hopes of luring students into their new money-making traps.

Here are some of the latest solicitations and incentives students should be wary of as they return to campus this fall:

Overdraft Programs
This fall many students will be signing up for their first bank account, but they should be aware of all the fees that come with it. When you open a new account the bank will ask you to make a very important choice; whether you want “overdraft protection”. If you choose to sign up for debit overdraft coverage, the bank will allow you to use your debt/ATM card to spend more money then you have in your account. Each time the bank covers your overdrafts, they charge you a high fee around $35. For those of you who already have bank accounts, the banks are advertising heavily to encourage people to sign up for these over-priced programs. Watch Out!

It is more cost-effective to be turned down at the checkout if you are short on cash rather than pay a $35 overdraft fee. If you feel like you need coverage, choose a less-expensive option such as opening a small savings account and linking your checking to your savings to cover overdrafts.

Prepaid Cards
They look like debit cards, but most prepaid cards must be purchased for a fee, and sometimes you have to pay a fee to add money to the card. Although these cards function much like a debit card linked to a bank account, they do not have the same guaranteed consumer protections. More companies are marketing these cards using images popular with students – such as The Twilight Movie prepaid card -- to encourage their use. But be sure to check the fine print for a list of the fees that come with the card, or better yet, get a normal bank account with a debit card.

Credit Cards
The CARD Act, which went into effect this year, placed some restrictions on how students and people under the age of 21 get credit cards. A person under 21 must either have a cosigner or show they have the means to repay any credit given. In addition, limits were placed on how credit cards are advertised on college campuses. You may notice these changes this year, but remember, credit card companies are notorious for finding ways to trick and trap people of all ages into credit cards.
If a student of any age is considering getting a credit card here are some tips to help avoid the credit card trap on campus:
If you are over 21 do not co-sign for your friends. Co-signing for your best friend or anybody else is a bad idea. Their mistakes can ruin your credit.
Don’t get a credit card until you are ready to pay in full every month. Make sure you can really afford to borrow money with a credit card. Before you apply for a credit card, ask yourself whether you really need one and how you’re going to pay for the money you borrow when the bill comes due. In most cases, a better alternative is to set up a bank account with a debit card. Just be sure to keep an eye on your balance to make sure you have sufficient funds on hand to avoid high overdraft fees.
Don’t fall for the credit card companies’ slick marketing campaigns. Under the CARD Act credit card companies are prohibited from offering freebies in exchange for students signing up with their card. But the companies will still be on campus in full effect. Just remember, they can’t make you fill out the form in order to get that free t-shirt!
If you decide to get a credit card, shop carefully and make sure you understand your contract. Not all credit cards are created equal. Learn about the card’s penalty interest rate and how they can be triggered. Also most credit card companies can change the terms of your contract but must give you 45 days notice before raising your interest rate on future purchases and tell you why they are doing so.
Look for a card with a low fixed Annual Percentage Rate (APR) and a low or no annual fee. Learn about the card’s penalty interest rate and how you can face higher interest charges on the money you already borrowed if you miss two payments. For new purchases a higher rate can be imposed if you are just one day late making your payment.
Don’t be tricked by the teaser rate. Credit card issuers might offer you a low interest rate to sign up for a card but after 6 months your interest can go up. Also, if the required minimum payment is not received within 60 days after the due date you may trigger much higher penalty rates and additional fees.
Don’t use your credit card to finance your education: Credit cards can be one of the most expensive sources of funds. Avoid using your credit card to finance your tuition, room and board, fees, books, transportation, and health insurance expenses.
Use your card wisely. Pay off your balance monthly and make all of your payments on time. Set up for automatic payments to pay off more than your minimum balance. Pay attention to your balance to avoid going over your credit limit. If you manage your credit card online, you can set up email alerts that keep you informed. Don’t take cash advances because they typically come with high interest rates.