Use a credit card for most large purchases, especially if you usually pay off your balance each month. Credit cards offer greater protection than other forms of payment. If your number falls into the wrong hands, you're liable for only the first $50 in charges, and most large issuers waive liability altogether. If you have a legitimate beef with a seller, it's relatively easy to have the charges removed until the dispute is settled, if you report the matter to the issuer within 60 days after the charge appears on your statement.

Use a debit card when you don't mind having the money withdrawn immediately from your checking account. Debit cards are a surefire way to avoid onerous credit-card interest charges. But you will need to keep track of how much money you have in your account so you don't incur equally onerous overdraft fees, which average around $30. Your liability with a debit card is limited to $50 only if you report the problem within two business days of discovering it. After that the limit leaps to $500, and there's no limit if you wait more than 60 days. Debit cards also provide less protection if you decide to dispute a charge with a merchant. Once the money's gone from your account, you can ask your bank to intervene in the dispute, but it doesn't have to.

Use a check if you need to make a large purchase somewhere that won't accept credit or debit and you don't want to carry cash. Canceled checks can also be useful as receipts or for tax purposes. If a check disappears, you can stop payment on it. Of course your bank is likely to charge you a stop-payment fee, which could run as high as $30.

Use cash whenever you like, as long as you can afford to lose it. There's no fear of identity theft, and it's accepted almost everywhere. But you won't have evidence of payment unless you save a receipt. Nor will you have the leverage that a credit card provides in a dispute.