Understanding the different types of charges on your credit card can help you to find the type of card that suits your needs. Each card has different interest rates, rewards, benefits, and fees. Banks are federally regulated and are required by law to disclose the fees they charge.
Types of fees
Some cards charge an annual fee each year. Some may also charge additional fees if you request another card for that account. Cards with annual fees usually have additional benefits and rewards, or a lower interest rate. Make sure to consider whether these benefits will save you money, otherwise a card with no annual fee may be the better option.
Cash Advance Fees
This fee is charged when you:
Use your credit card to withdraw cash from an ATM
Use your credit card to withdraw cash at a bank
Use convenience cheques, also called credit card cheques
Charge cash-like transactions such as wire transfers, money orders, travellers cheques and gaming transactions (using your credit card to place bets and buy casino chips)
A cash advance fee could be a fixed amount, or a percentage of the transaction. Some credit card issuers may also set a minimum and maximum cash advance fee. You will also be immediately charged interest, and continue to be charged interest daily until the entire advance is paid. Try to use your debit card instead. If you use a cash advance, pay as much as you can as early as possible. The interest charged costs more each day you wait. You can make a payment on your credit card account at any time, and don’t have to wait for your statement.
Foreign Currency Conversion Fees
When using your credit card outside of Canada, your card issuer will charge you the exchange rate, plus a conversion mark-up as indicated on your credit card agreement. If you try to withdraw cash from a foreign ATM with a credit card, it is treated like a cash advance, with a conversion mark-up fee.
A credit limit is the maximum amount you are allowed to spend using your credit card. The penalties you pay for going over the limit varies between issuers. They will not inform you when you are about to go over your credit limit, so it is your responsibility to keep an eye on your balance.
This fee may be charged when:
A payment by cheque is returned due to nonsufficient funds
You use a convenience cheque to get a cash advance on your credit card, but the issuer returns the cheque because you are over your limit
A regular payment by pre-authorized debit is rejected due to nonsufficient funds
Inactive Account Fee
Generally, after a year, some credit card issuers may charge you a fee for maintaining an inactive account, and may even close your account. If you no longer need your credit card, make sure to contact your card issuer to cancel it, and keep a record of the cancellation.
Interest rate increase after missed payments
If you miss your minimum monthly payments, your issuer may increase the interest rate on your card. This will usually go up between 2% and 6%.