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We all know the dumb ways to use a credit card, such as getting into debt and racking up fees by missing payments. Nevertheless, there are still plenty of smart ways to use a credit card.

Used wisely, credit cards can be a secure and convenient method of payment that offers valuable rewards. Here are six of the best ways to use a credit card.

1. As a Method of Payment

When you pay your statement balance in full and on time, you will avoid interest charges. When used in this way, the credit card becomes simply a method of payment, not a means of finance. That allows cardholders to enjoy several benefits at no cost. For example, customers receive what amounts to a free loan when they make purchases that are paid off 25 to 55 days later. In addition, cardholders are afforded the protections against fraud that are guaranteed by the Fair Credit Billing Act.

2. To Earn Rewards for Spending

Cardholders who use reward cards earn valuable points, miles, or cash back for the purchases that they would have made anyway. Those who earn cash back are realizing a discount on all of their purchases, from 1% to 2% on their general spending to 5% or even 6% for purchases from specific bonus categories of spending. This might not sound like a lot, but some cardholders earn hundreds of dollars in cash-back rewards each year. Alternatively, some cardholders prefer to earn points and miles toward award flights, free hotel nights or other travel rewards. Here are some of the best cash-back credit cards in America.

3. As Protection Against Unscrupulous Merchants

One of the less appreciated benefits of a credit card is that you are protected when a merchant fails to deliver the goods or services you paid for, or what you received was substantially different that what was described. To get your money back, you simply have to contact your credit card issuer and request a chargeback. A temporary credit for the amount in dispute is immediately received, and it becomes permanent once the card issuer has researched and substantiated your claim.

For example, if you paid for a product that never arrived by mail, you would receive a full refund. Or, if you purchase a service for one year, and the service provider goes out of business after a few months, you would receive a pro-rated refund for the service you didn’t receive.

4. As a Substitute for Rental Car Insurance

Every time you rent a car, the rental company will offer to sell you an expensive insurance policy that you pay by the day. Yet nearly every credit card comes standard with a no-cost collision damage waiver policy that covers you when you use your card to pay for the rental. To activate this coverage, cardholders must always decline any optional insurance policies, and be sure to rent the type of vehicle that is covered, as some luxury cars and trucks are excluded from coverage.

5. To Get a Big Sign-Up Bonus

The credit card business is one of the most competitive industries in the world, and card issuers are willing to go to great lengths to get new customers. So much so, that many cards will offer new applicants valuable points, miles, or cash back, just for a chance to earn their business (here are some cards that do so regularly). Travel rewards enthusiasts commonly earn enough points or miles from a single sign-up bonus to pay for a hotel or flight that would have cost more than $1,000.

Cardholders must be careful to meet the terms of any offer, which typically include a requirement to spend a minimum amount within a given time period. Then, cardholders are free to use their card as they please, or even cancel it when the annual fee becomes due.

6. To Build Credit

A credit card can be extremely helpful in building a good credit history so you can qualify for better rates on big purchases down the road like a car or a house. You can see how your credit cards are affecting your credit scores for free every month on Credit.com.

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