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Credit Card Fees

When filling out a credit card application, one of the first things you'll notice is a list of possible fees you'll have to pay. If you do not pay off your amount during the grace period, you may be liable to a variety of costs, ranging from real transactional costs to future interest charges, depending on the kind of transactions you make with your card. This chart outlines the fees that may be associated with your credit card, with a more full analysis of each cost underneath, so you're not in the dark about any of them.

Summary of Credit Card Fees

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

Annual Fee

Many credit cards, particularly reward cards, include an annual charge. The number indicates the advantages you will earn for using the card (such as travel points and cash back incentives). This price applies even if you don't use the card once throughout the year. Your annual fee will show on your first credit card statement unless you can discover an offer that waives it for the first year.

The average annual price is $20-120, although it might be more or less. However, as the advantages of a credit card grow, so does the cost. For a $120 yearly fee, the TD Aeroplan Visa Infinite, for example, provides priority seating on Air Canada flights and a welcome bonus of 15,000 Aeroplan Miles. The American Express Centurion, on the other hand, comes with free hotel rooms, a dedicated concierge, and personal shoppers; it also has a $5,000 initiation cost and a $2,500 yearly cost.

Authorized User Fee

You must pay an approved user charge for each extra card tied to your credit card account if you wish your kid, partner, or spouse to have a secondary card. This is a nice option for couples to consider, or for a parent to gift a child before they go for college, but keep in mind that you, as the principal cardholder, are liable for any purchases made by the other users.

Overlimit Fee

Each credit card in your wallet has a credit limit, which is the maximum amount you may charge to your account with that card. You may be charged an overlimit fee if you make a purchase that puts you over that limit. Overlimit fees on Canadian bank-issued credit cards generally vary from $25 to $30. It's advisable to spend less than 35 percent of your credit limit at all times to prevent this and maintain a good credit score.

Foreign Transaction Fees

The credit card issuer charges a conversion fee when you make a transaction in a foreign currency (e.g., not in Canadian dollars). Assume you have a CIBC credit card with a foreign currency conversion charge of 2.50 percent of the converted amount. If you were in England and used your credit card to make a purchase, CIBC would buy British Pounds on your behalf, pay the merchant for the transaction, and then charge you for the convenience of doing so. It's possible that the conversion will not appear on your statement. Instead, when the conversion fee has been applied, you will see the amount paid to you in Canadian dollars.

Interest Fees

The most frequent, and generally the most expensive, charge connected with using a credit card is this one. Interest may be avoided altogether if you pay off your debt in full by the payment due date, as we outlined in how credit cards operate. If you do not pay off the sum in full, however, interest at the annual percentage rate indicated in your contract begins to accumulate. Here's additional information on how credit card interest costs are computed and applied to your monthly credit card statement.

Administrative Fees

Finally, your account may be subject to a variety of administrative costs, including inactive account fees, statement copy costs, and dishonoured payment costs. There is no standard for credit card fees since they vary per product, but this information must be provided in your credit card application. Furthermore, if the credit card company is forced to spend legal costs to collect from you, you may be compelled to reimburse them.

Using a credit card does not have to be expensive as long as you pay off your debt in full by the due date and there are no annual fees attached to your account. However, as we've already shown, there are a variety of accusations that might be levied against you. It is critical that you read the conditions of your contract before activating your card to ensure that you are aware of any possible expenses. Remember that an annual charge isn't something you should avoid; if you utilize the card to its maximum potential, the charge may frequently be countered, if not surpassed, by the benefits it offers.