Playing it smart when you pull out the plastic can pay off big

Imagine if someone suddenly took away all of your plastic. Credit cards are so much more convenient and safer than carrying cash, it's hard to imagine life without them.

As the credit-card industry has evolved, new products and features make using credit cards even more appealing — if you know how to play the game.

Here are four ways to get the most out of your plastic.

• Build a good credit rating. Pay your credit-card bills on time, stay well within your credit limits and be careful not to take on too much debt with too many cards, and you'll begin to establish an excellent record on your credit reports from all three credit reporting agencies.

That information, in turn, is used to calculate your credit score, which tells potential lenders how likely you are to repay your debt.

Use your cards to boost your credit score and you'll not only qualify for zero and low-interest rates on competing cards but you may be eligible for a better deal on your mortgage and auto insurance.

• Protect your big purchases. If you buy something that's damaged or defective and you used a credit card, you have the right to withhold payment under the Fair Credit Billing Act.

You do need to make a good-faith effort to solve the dispute with the merchant. But if you can't, your credit company will investigate the problem.

If after contacting the merchant you are unable to settle and the card company sides with you, the charge won't be added to your bill.

Purchases made with debit cards are not covered under the Fair Credit Billing Act.

In addition, some cards offer extended warranties and other protections for large purchases made on the card. Check with your credit-card company.

• Make online shopping safer. The Fair Credit Billing Act also covers online purchases, making a credit card the best way to pay in cyberspace. If you're worried about security, many credit-card companies offer a one-time use account number for large online purchases that keeps your real account number off the Web.

• Use your card for a low-interest loan. Robert Manning, research professor of consumer finance at the Rochester Institute of Technology and author of "Credit Card Nation," once used a credit card with a low interest rate to buy a car.

The fixed-rate was better than what banks were offering on auto loans and he didn't have any of the application hassles. (Of course, this only makes sense if you qualify for a very low-interest card and a very high credit limit — and you can afford to pay the big balance off quickly.)

Manning even suggests young people strapped for cash use a low-interest card to fund their 401(k)s in some instances.

"Say you borrow $4,000 to contribute to your 401(k)," Manning says. "Maybe your company makes a 50 percent match.

"Last year the stock market went up 10 percent. The free money from the match and the stock gains will far outweigh the interest on the 'loan' you made to yourself if you pay off the card responsibly."