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Credit cards can be a good idea
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Watch reward limits
There are other essentials for enjoying the best of credit cards, experts say.

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"People should check out the limits and caps of their cash-back or rewards credit card," says O'Neill. "Some cards cap the amount of annual reward that you can earn.

"For example, my GM card allows earning only up to $500 annually. When you reach the maximum annual reward, you might want to switch to another card to earn rewards there."

And as always with credit cards, it's essential to read the fine print.

"Users need to be aware of the limitations on the use of reward dollars," O'Neill says. "You might only be able to use rewards for specific product brands or types of merchandise, so be sure they are items that you really want."

Caveat for those in deep debt
The small perks of credit cards might not be worth the risks for those who have run up heavy debt, credit counselors say.

"If people are in trouble, we work with them to close all their accounts and not use any line of credit while being in the program," says Zorina Gonzales, a customer service representative with Consumer Credit Counseling Service of the Sacramento Valley, Calif., who says that the exact plan varies, depending on the individual case and individual budget.

Often, a credit freeze is recommended until the client is back on solid ground.

"We suggest cutting up cards, closing accounts and not using any line of credit unless it's to purchase a vehicle or a home."

Of course, not using any credit cards can be annoying, says Xiao.

"When we do research; we see a lot of inconvenience," he says, referring to those on the cut-the-cards plan required by most debt management programs. "If you stop using credit cards, you lose the protection of using credit cards. You'll have some difficulty in real life. You'll have problems buying tickets online, for example.

"I think the most important part is to make sure you can control it," says Xiao. "If you can control it, it's a good thing."

Bankrate.com's corrections policy -- Posted: Aug. 11, 2006
 
 
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