If you’ve ever applied for a credit card, then chances are you saw the list of potential fees that come with them. Depending on where you use your card, the types of transactions you make, and whether you pay your bills on time, you could be subject to a wide range of fees. In this article, we explore some of the key types of credit card fees to be aware of.
Annual fees
Most credit cards, especially rewards credit cards, come with an annual fee. As the name suggests, the annual fee must be paid once a year. It will appear on your very first credit card statement, and every year thereafter for as long as you have the card. Credit card annual fees vary in price, ranging anywhere from $20 to $200. Generally speaking, the better the benefits, the more expensive the card’s annual fee.
Foreign transaction fees
If you travel frequently or make purchases in other currencies, foreign transaction fees are another type of fee you must be aware of. Anytime you make a purchase in a foreign currency, whether you are located in Canada at the time of the purchase or not, it is subject to a foreign transaction fee. A foreign transaction fee is the credit card issuer charging you a fee to do the currency conversion. Foreign transaction fees vary and are typically listed as a percentage (e.g. 1.5% or 2.5%). It’s worth noting that the foreign transaction fee you are charged may not appear on your credit card statement. Rather, you may only see the total amount charged in Canadian dollars, inclusive of the fee. Ultimately, if you travel frequently or make purchases in other currencies, it might be worth it to find a travel credit card with less or no foreign transaction fees.
Overlimit fees
All credit cards come with credit limits. A credit limit is the maximum amount you can charge to your account in one billing cycle. If you make a purchase that pushes you over this limit, you will likely be charged an overlimit fee. Overlimit fees vary by the financial institution but typically range between $25 and $30. These fees can easily be avoided if you know your limit and stay within it. (Most financial experts recommend using less than 30% of your credit limit at all times if you want to keep your credit score up.)
Interest fees
Interest fees are one of the most common types of fees associated with credit cards. They also tend to be the most expensive. Interest fees are charged if you fail to pay your credit card balance by the due date each month. If you do not pay your balance on time, you begin to accrue interest at the rate specified in your contract. However, if you make all credit card payments on time and in full, you can avoid interest fees altogether.
Authorized user fees
Authorized user fees are one final type of credit card fee to be aware of. If you want your partner or child to have access to a secondary credit card that is attached to your card, you will have to pay an authorized user fee for each additional card. While adding a secondary cardholder to your credit card has many benefits, it’s important to note that the primary cardholder is responsible for the transactions made by all users.