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Credit cards 101: how to beat the banks

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Trying to get a clear picture of the fees and charges you're likely to be hit with by your credit card can be an indecipherable guessing game.

The number and types of fees can vary depending on which card you choose. To help you be aware of what to look for, here is a guide to some of the most common credit card fees and charges:

Annual fees

Most cards carry an annual fee, ranging from zero to as much as $700, depending on the benefits on offer. Some cards do not charge a fee for the first year to entice you to sign up, while a handful of cards charge no annual fee for the life of your card. One example is St George's No Annual Fee Visa or Mastercard. What you save in an annual fee, however, you may pay for with a higher interest rate.

Cash advance fee

Using your credit card to withdraw cash doesn't come cheap. You'll end up paying either a flat fee or a percentage of the amount advanced – usually between 2 and 4 percent.

Late payment fees

Late fees can add a fair whack to any credit card statement. Always try to pay your bill on time.

Foreign currency transaction fee

Whether you're travelling or shopping online, you may be whacked with a foreign transaction fee for using your card in a country other than Australia. Shop around for a good deal on this one.

Card replacement fee

Lost your card? Be prepared to pay for your mistake, as a growing number of banks now charge a replacement fee for lost cards.

Over-limit fee

If you spend more than your credit limit, your bank may charge you an over-limit fee every time you exceed your credit limit during a statement cycle. National Australia Bank has abolished such fees and other banks may follow suit, but in the meantime keep an eye on your limit.

The key to avoiding most of these fees and charges is to use your card sensibly, and pay it in full – and on time – every month.

It's also worth being interest rate savvy. Most of us choose our credit card based on the interest rate. Low-interest credit cards are gaining popularity, but it's important to note that the low rate usually expires after a set period – six months or a year. After that, your card may revert to a much higher rate, so always check the standard rate.

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