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One of the first things you may notice when filling out a credit card application is the list of potential fees you could have to pay for it. Depending on what types of transactions you make with your card, you could be subject to any number of fees, from actual transactional fees, to their subsequent interest charges if you cannot pay off your balance within the grace period. So you’re not left in the dark about any of them, this chart lists the fees you may find attached to your credit card, with a more detailed breakdown of each below.
|Fee||What is it?||How much?|
|Annual Fee||A yearly charge for the benefit of using a credit card; this usually only applies to rewards cards.||Typically $20-$120|
|Authorized User Fee||A yearly charge for each additional credit card you have issued for the same account||Typically $20-40 per extra card|
|Overlimit Fee||A charge for exceeding your credit limit in a given month||Typically $25-30|
|Foreign Transaction Fee||A charge for a purchase made in a non-Canadian dollar currency||Typically 2.50% of the purchase price|
|Interest Fees||A charge levied when balances are not paid in full by the payment due date||Can range from 0% for introductory offers to as much as 30% if minimum payment has not been met. 20% is roughly the standard for Canadian bank-issued cards|
|Administrative Fees||Charges for things like copies of statements, dishonoured payments (e.g. bounced cheques) and inactive accounts||Varies depending on the situation. Copies of statements can cost up to $10, dishonoured payments can cost up to $40 and inactive accounts may also cost $10|
Many cards, and specifically rewards cards, come with an annual fee. The amount reflects the benefits you will receive (such as travel points and cash back offers) for using the card. Even if you don’t use the card once during the year, this fee still applies. In fact, unless you can find a promotion where it’s waived for the first year, your annual fee will appear on your very first credit card statement.
Annual fees typically range from $20-120, but can be more or less. As a credit card’s benefits increase, however, so does its fee. For example, the TD Aeroplan Visa Infinite includes priority seating on Air Canada flights and a welcome bonus of 15,000 Aeroplan Miles, for an annual fee of $120. The American Express Centurion, on the other hand, includes complimentary hotel rooms, dedicated concierge and personal shoppers; it also comes with a $5,000 initiation fee and the annual fee can go as high as $2,500.
If you want your child, partner, or spouse to have a secondary card attached to your credit card account, you will have to pay an authorized user fee for each additional card. This can be a good option for couples to consider, or for a parent to give a kid before they move away for school, but it’s important to remember that you – the primary cardholder – are responsible for any and all transactions made by the other users.
Each credit card in your wallet has its own credit limit, which is the maximum amount you can charge to your account. If you make a purchase that pushes you over that limit, you may be subject to an overlimit fee. For Canadian bank-issued credit cards, overlimit fees typically range in the $25-30 range. To avoid this, and to keep your credit score up, it’s always best to use less than 35% of your limit at all times.
When you make a purchase in a foreign currency (e.g. not in Canadian dollars), the credit card issuer charges a fee to do the conversion. For example, let’s say you have a CIBC credit card with a foreign currency conversion fee of 2.50% of the amount converted. If you were in England and you made a purchase with your credit card, CIBC would effectively buy British Pounds on your behalf, pay the merchant for the purchase and then charge you for the convenience of doing this conversion. You may not see the conversion on your statement. Instead, you will see the amount charged to you in Canadian dollars after the conversion fee has been done.
This is the most common, and usually the largest, fee associated with using a credit card. As we explained in how credit cards work, if you pay off your balance in full by the payment due date, interest can be avoided entirely. However, if you do not pay off the balance in full, you start to accrue interest at the annual percentage rate specified in your contract. You can read more about how credit card interest fees are calculated and added to your credit card statement each month here.
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Finally, there are a number of administrative fees that may apply to your account; these range from inactive account fees, statement copy fees and dishonoured payment fees. Each credit card product comes with fees of varying amounts, so there’s no standard, but this information does have to be included in your credit card application. In addition, should the credit card company have to pay legal fees to collect from you, you may be obligated to compensate them for their expenses.
Using a credit card does not necessarily have to cost you money, so long as you pay off your balance in full by the payment due date and there are no annual fees associated with your account. However, there are number of charges you can be subjected to, as we’ve outlined above. Before you even activate your card, it is imperative that you read the terms of your contract to understand all the potential fees associated with it. And remember that an annual fee isn’t something you need to steer clear of; if you use the card to its full advantage, the fee can often be offset and even exceeded by the rewards that come with it.