9 reasons to love credit cards

Credit improvement. Credit cards can help you build or restore your credit rating. As long as you pay your bills on time and use only a portion of your credit limit (under 30% is good; under 10% is even better), you're helping to polish your credit scores. All of us need to worry about our credit standing these days, as the credit crunch makes getting loans tougher and more expensive for those without good credit scores. Credit information is also used by employers, insurance companies and landlords, so it pays to be vigilant.

Extended warranties. Our platinum MasterCard doubles any manufacturer's warranty to extend up to a year beyond the date the original expires. American Express and Visa's Signature cards offer similar benefits. Consumer Reports tells us most extended warranties are a waste of money, but you can't beat the price of this one.

Interest-free loans. If you pay your bill in full every month, you're essentially getting an interest-free loan on every purchase you charge. Some folks take this concept further, using 0% offers to extend their interest-free loans for months, or even using the money to invest (see "0% daredevils chase 'free' cash"). I'd advise this only if you have enough cash in the bank to pay off the loan on a moment's notice. While the Credit CARD Act will soon bring big changes for cardholders, under current law, credit card companies can change virtually any rate or term on a whim. You don't want to rely on them to keep their promises about that low rate lasting "for the life of the balance" or any other period of time.

Purchase protection. Higher-end cards tend to come with several types of insurance, including coverage if something you buy is stolen or damaged. Our platinum MasterCard, for example, provides "Purchase Assurance," which pays to replace or repair items purchased within the previous 90 days. Visa Signature and American Express have similar benefits.

Rental car coverage. Our auto insurance provides most of what we need to waive the rental car companies' expensive coverage. My business VISA and our platinum MasterCard fill in the gaps, covering our deductible and charges such as "loss of use" that aren't part of our auto insurer's plan. ("Loss of use" is the extra charge rental cars levy for the days a car is out of service being repaired.)

Rewards, rewards, rewards. How do I count the ways? Plane tickets, hotel stays, cash back, discounts . . . a month doesn't go by that we don't reap some reward from our cards. One of my new favorites is my business Amex card's Open Savings program, which gives me discounts ranging from 2% to 20% with nearly two dozen companies, including airlines, hotels and package-delivery services. I don't have to do anything to get the rebate. I just use the card with those companies, and the discount is applied to my purchase.

Our other cards require a little more effort to redeem rewards. I keep track of our point, mile or rebate total on each, and make sure to regularly cash them in.

If you don't like your rewards card, chances are you've got the wrong card. Check out "20 credit cards that pay you back" to see if there's a better fit.

Of course, not everyone is a good candidate for a rewards card, or even a credit card, for that matter.

Some people simply can't control their spending; to them, a credit card is the equivalent of a drink to an alcoholic. If that describes you, you're wise to steer clear of plastic.

If your situation isn't so dire, but you do carry a balance, then look for a low-rate card so you can pay off your debt as quickly as possible. Let the rewards wait; being debt-free will be the best reward you can earn.

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board and helps middle-class families cope at Building a Brighter Future.

Updated March 19, 2009

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