Use your credit cards wisely, and you can gain a free short-term loan on purchases. Pile up balances or pay late, and suddenly you can face expensive debt, fees and other penalties. The secret of smart card use: Take advantage of the perks, and avoid the penalties.

"If you want to maximize the value (of your cards), you don't want to rack up costs," says Josh Frank, senior researcher at the Center for Responsible Lending. "And with a balance, you rack up costs."

Also important: making payments on time, he says. Not only do you avoid penalty fees, but you also avoid onerous penalty-rate hikes.

Some issuers also put your rewards at risk when you pay late, says Frank. You may stop accruing rewards, lose the rewards you've already accumulated or get charged a fee to regain them, he says.

Paying late can even lower your credit score if the delinquency winds up on your credit report.

Want to save money? If you carry a balance, you're probably better off with a lower rate than a rewards card, says Frank. Often what you pay in interest is more than what you make in rewards, he says.

And forget using your card at the ATM. Skip those cash advances, says Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies.

"The interest rates on those are always very high," he says.