(MONEY Magazine) – THIS MONTH:

--Advice on how to use digital cash --Beware of shrinking rebates on credit cards. Think the only places you'll ever see electronic money replacing checks and hard cash are in science fiction novels or reruns of The Jetsons? Consider the following:

--People in an estimated 22 million households regularly use a debit card--a plastic card with a magnetic strip that electronically siphons the amount of your purchase from your bank account.

--In an experimental program launched at last summer's Olympics, thousands of Atlanta residents and visitors spent more than $1 million at as many as 1,500 local stores using Visa "smart" cards with a specific dollar value (typically $10 to $100) stored in a computer chip.

--On the Internet, trailblazing shoppers can pay for everything from Vuarnet sunglasses to Counting Crows CDs by pulling electronic coins and bills out of a virtual wallet.

No one is predicting that smart cards and cybermoney will make checkbooks and greenbacks obsolete. "But as many as 20% of payments could be made electronically by the end of this century, up from 13% today," says James Chessen, chief economist at the American Bankers Association.

To keep you up to warp speed on high-tech ways to pay, we've arranged a guided tour of the latest forms of electronic currency. Read on to find out how the different types of electronic payments work and to learn the potential perils of high-tech moolah.

--Debit cards. Banks are increasingly replacing their regular ATM cards with combination ATM/debit cards that still work in cash machines but also let you pay for purchases by having money withdrawn directly from your bank account. Experts predict that 40% of households--compared with 23% now--will shop with a debit card by 2000.

Don't assume, though, that your MasterCard or Visa debit card offers the same safeguards as its credit-card siblings. For example, if your credit card is lost or stolen, federal law limits your liability to $50 in unauthorized charges. But with a debit card, unless you report the loss within two days of discovering it, you could be responsible for up to $500--and you could take a hit for the entire loss if you fail to report it within 60 days. With a credit card you also have the right to refuse to pay your bill if you're dissatisfied with a purchase. You lose that leverage with a debit card, since the money has already been deducted from your account.

Our advice: Debit cards are great if you don't like carrying lots of cash but also don't want to run up huge charge bills that can make for unpleasant surprises at the end of the month--and possibly generate hefty interest charges. Just remember to guard your card as closely as you would actual cash or your checkbook.

--Stored-value cards. These cards have a specific amount of credit imbedded electronically either within the card's magnetic strip or, in the case of a smart card, in a computer chip. The best-known versions are the fare cards sold by public transit systems in New York City, San Francisco and other cities, although some colleges, such as the University of Michigan, let students pay for meals and laundry service with stored-value cards. Indeed, experts believe that for at least the next few years, these cards will be pretty much confined to schools and other specialized settings.

During the next two years, a task force of officials from the Treasury Department, the Federal Deposit Insurance Corporation, the Federal Reserve and other agencies plans to look into a host of questions raised by electronic cash. One key issue: whether an issuer must give you a new stored-value card if your old one malfunctions before it runs out of money. Meanwhile, the Fed proposed last year that most stored-value cards be treated as cash, while the FDIC suggested last summer that nearly all such cards issued by banks not be covered by federal deposit insurance.

Our advice: While stored-value cards can certainly be convenient--no fumbling for coins or carrying thick wads of bills--never forget they are the equivalent of cash. If your card is lost or stolen, the issuer is probably not obliged to make you whole.

--Digital cash. Most shopping on the Internet these days is done by credit card. Still, a few high-tech ventures have devised ways to let pioneering shoppers transmit cash online, mostly so that merchants selling inexpensive items don't have to pay fees to credit-card companies. In September, for example, CyberCash (http://www.cybercash.com), a Reston, Va.-based company, introduced CyberCoin, a software program that lets you transfer money from your bank or credit card into an electronic purse. Another company, DigiCash (digicash.com), issues a similar product, called Ecash. Currently, only about 115 merchants, such as the online music store CDnow, accept digital dollars and coins--and only a few thousand shoppers use it.

With CyberCoin, your digital stash is held in a special bank account that is linked to your computer. If a hacker breaks into your computerized wallet, your maximum potential loss is the same as with a debit card. Your money is also covered by federal deposit insurance. In the case of Ecash, however, a bank converts your dollars into digital coins and returns them to you for storage on your computer's hard drive. Ecash's digital money is thus considered cash. So it's not covered by FDIC insurance, and you absorb the loss if it's stolen.

Our advice: At this stage, credit cards are still the best way to pay online. So unless you're dealing with a retailer who will accept only digital dough--or you want to brag about your technical prowess--stick with good old-fashioned plastic.