We have all heard countless stories of people over their heads with credit card debt-maxing out every card they own, then only being able to afford the minimum monthly payment. High interest payments shackle people to their debt for years, not to mention the significant income drain the finance charges have on their families.

It is unfortunate that many Americans must live with this reality, since with some financial discipline, this delimma is avoidable. When a spending plan is developed and followed, a credit card becomes no more dangerous than any other form of payment.

When credit card bills are paid in full each month, credit card fees and finance charges do not accumulate. With a little extra bookkeeping from a spending plan, a credit card is transformed from being a burden to a very rewarding financial partner-since it provides the following advantages over other forms of payment:

Rewards Programs.

Many credit card companies offer loyalty programs to reward those customers who use their cards more. Rewards usually come in the form of points or cash. Depending on the company, the points can be redeemed for things like restaurant gift certificates, hotel stays, airfare, vacation packages and more. Cash cards typically pay a 1% rebate on your purchases, which makes for an extra $180 a year on monthly spending of $1,500. This level of spending is easily achieved by putting all your purchases on a credit card (including utility bill payments). There are even cards that pay more than 1% for particular types of purchases like groceries or gas, such as Citi's Dividend Platinum Select card.

Perpetual 0% Loan.

When you use a credit card, you are using the bank's money to pay the store instead of yours-for free. While you're waiting for your statement to arrive, your money can continue to work for you in an interest- bearing account, such as ING Direct's Orange Savings. Unlike a debit card that continually reduces your account balance, using a credit card preserves your entire bank account balance for earning interest until your statement's due date. That's an extra $35.25 a year based on a $1,500 balance at today's rate of 2.35%*.

Fraud Protection.

If your credit card number is used fraudulently, by law your maximum liability is $50. This is not true of a debit card. A perpetrator can easily use your debit card as "credit" transaction in retail stores or online. This type of transaction does not require a PIN number to be entered, and is especially dangerous since a thief can clean out your entire bank account in short order.

Loss Protection.

Unlike cash which is gone for good if lost, a credit card can be replaced within days of reporting it to the issuing bank. In the meantime, you're protected against unauthorized use by anyone who finds the lost card.

Warranty Coverage.

Many MasterCard credit cards warrant your purchases above and beyond that offered by the product's manufacturer. Your purchases made with one of these cards get an extra level of protection for free. See MasterCard's website (http://www.mastercard.com) for the full scoop on their coverage terms.

Purchase Protection.

Another benefit MasterCard offers on most of their cards. With their Purchase Assurance plan, your purchases are automatically insured against damage or theft for the first 90 days, also at no additional cost to you.

With all of these benefits over other forms of payment, credit cards can easily become your favorite way to pay. Instead of dreading your credit card bill each month, it can become a pleasant reminder of your money mastery.

Copyright 2005, Jim Hood