CREDIT CARDS

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Be careful with your credit card this Christmas

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Using the wrong credit card to shop online and overseas is set to cost Australians an estimated $200 million this year, reports suggest.

Many cardholders are being slugged around 3 percent of the cost of a transaction, plus an additional fee of $4, when they shop with international retailers, both online and while travelling abroad.

These charges may appear on your credit card bill as a "currency conversion fee" and an "overseas transaction fee" and occur when a bank has to convert your Aussie dollars into foreign currency during an international transaction.

"Consumers really don't understand that they are getting ripped off," John Symonds of mortgage broker Aussie told Today Tonight.

"The money is better in your pocket looking after your family rather than throwing it away to credit card companies and the banks."

But there are simple ways to beat the banks, according to RateCity spokeswoman Michelle Hutchison.

"There are ways to avoid these types of fees when you're shopping online or overseas. Compare cards that don't charge a foreign currency conversion fee or international transaction fees," she said.

There are now six credit cards in the RateCity database that do not charge a fee for currency conversion, from providers Bankwest, GE Money, Horizon Credit Union and the latest player to enter the market, Aussie.

Fat profits

The banks' credit card profits don't stop there, though.

Last year the banks made $1.3 billion from credit card fees and an estimated further $6.1 billion in interest, despite the Reserve Bank lowering the cash rate by 1.25 percentage points.

If you find it hard to repay the debt in the interest free period, RateCity's Hutchison says it's important to go for low rate cards: "There're a lot of deals out there that can save you a lot of money, especially for your Christmas shopping."

Her top picks include the Community First Credit Union Low Rate Visa with a 9.5 percent interest rate and annual fee of $40, the Victoria Teacher's Mutual Bank Visa Platinum with a rate of 9.99 percent and annual fee of $84, or the Greater Building Society Visa Credit Card with an interest rate of 10.25 percent and an annual fee of $40.

And finally, Aussie's Symonds offers this advice to cardholders: "Consumers need to get off their butt and do something about it and save potentially hundreds of dollars and spend it on themselves and their family."

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