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Credit cards can be a good idea

Just because many Americans have overdosed on debt doesn't mean using credit cards is a bad idea. In fact, there are times when a credit card is clearly the best choice.

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For starters, you usually get far more purchase protection with a credit card than you do with cash or check. That helps when you buy a $1,000 laptop that suddenly has a damaged screen a week after you walk out of the store and the store manager and the manufacturer insist it's your fault.

Save-the-day features kick in when you travel. Credit cards often include free car rental insurance and some travel insurance, though offers vary with each issuer.

And if a thief picks your pocket, your liability is much lower than with a wad of cash.

Add in miles, rewards points and cash back, along with the interest-free loan if you pay every month, and you'll find a lot of credit card experts using their cards to charge everything they can.

"I try to buy everything with a credit card," says Scott Bilker, author of "How to Be More Credit Card and Debt Smart." "I hate using cash, because if you lose it, it's gone. With credit cards, the bank's money is gone.

"You just have to be careful to use them in your favor. It takes work -- research and phone calls."

Protect yourself with a card
But, you might think, how often will I need purchase protection?

"Some of the severe cases are when the airlines go bankrupt," says Barbara O'Neill, a professor of financial resource management at Rutgers University and the author of "Saving on a Shoestring: How to Cut Expenses, Reduce Debt and Stash More Cash." "Those who pay with a cash or check are out of luck."

The bottom line is you have some very useful legal rights if you shop with a credit card.

"There is a law on the books that says you can dispute if you've purchased something with a credit card," O'Neill says.

It's called the Fair Credit Billing Act, and it covers purchases made by credit card, not debit card, anywhere in the world, as long as the credit card was issued in the United States.

"If it's found to be in your favor, you don't have to pay the charge," she says. And until everything is settled, you don't owe a thing. "You can refuse to pay the charge until the dispute is resolved."

Charging when you're already in debt
All this talk of the good side of credit cards needs a big warning sign. At last count, 61 percent of Americans carried a credit card balance every month, making the "charge-everything" strategy a little risky.

Jing Jian Xiao, professor and director of the Take Charge America Institute for Consumer Financial Education and Research at the University of Arizona, says that "people, in general, even if they're in debt, they keep using credit cards. That's why they're in debt.

"Now, the new trend is that credit cards are for necessities," says Xiao, who studies the behavior of people trying to cut debt. "Before, credit cards were to show status. More people use credit cards for daily expenses. That means that if they don't have money, they just apply for more and borrow more."

Next: "Are credit cards always a bad thing?"
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