Is your child heading to college for the first time? Maybe you have a returning student in the house.

Either way, the New Jersey Department of Banking and Insurance is urging both parents and students alike to make smart financial decisions to avoid paying unnecessary costs.

"The average college student has five credit cards," said Acting Commissioner of the New Jersey Department of Banking and Insurance Ken Kobylowski. "That was the result of aggressive marketing by credit card companies where they were offering free gifts to students to get them to open a card without even checking to see if they even had the funds to pay off the card. This is no longer allowed following the passage of a law in 2009 which forbids credit card companies from offering gifts to market credit cards to college students."

"Today's college students and their parents are facing significant costs to meet their tuition payments and college living expenses, so it's important that they make educated choices and manage their money as wisely as possible in other college-related financial decisions," said Kobylowski. "One way they can do that is to make sure they know what they're getting into ahead of time. Look at the contract, know what the fees are, know what the interest rates are and be aware of the rates on cash advances. Some credit card companies impose steep fees for missed or late payments or exceeding credit limits and many charge fees whether the card is used or not."

Universities may contract financial institutions to disburse financial aid to students to save on administrative costs.

These banks issue debit cards under the university name to students to access the funds. "Problems can very easily occur if students use these cards as debit or credit cards without being aware of the fees and rates associated with it," said Kobylowski. "It's not a bad idea to go back to the old method of taking student loan money in the form of paper checks. It's also not a bad idea to open an account at a local bank that's close to campus so the student can access funds that way instead of using the college-sponsored debit card."

Before signing up for a credit card, students should read the contract carefully.

"The ages of 17, 18 and 19 years old are when good financial habits should begin. When you're children are heading off to college, it's the perfect time to start teaching them so they can start off on the right financial foot and avoid unnecessary debt," said Kobylowski.