Wow, I just typed out a response and when I went to post it, it said I wasn't logged in!!!
Ok, this is my personal experience:
Damo- The only penalty you have is if you book a non refundable flight you can not get your money back, you have to use your credit towards another flight at a future date before the one year expiry of your funds. You can do everything online or you can call SW. If it's a DING rate that will not do it over the phone.
B&BMom - What I do is have a screen open with the DING fare all the way to booking with your information(name and such), then open another SW screen and cancel reservation. Once you cancel your original reservation, then you get a confirmation #, you need that info to put in to your DING booking screen. We never buy cancellation insurance as you can cancel with SW and rebook. What I've done in the past is sold my credit with SW to a friend. I've also bought someone else's credit from them. All you need is the confirmation number and credit card holder name to book a flight when using a credit.
I hope I've answered your questions.
Marilynn