Common Credit Card Terms and Conditions Explained

The fine print on your credit card may not be exciting, but it can significantly affect how much your card costs and how it impacts your credit.

Understanding key credit card terms can help you avoid fees, penalty rates and unnecessary interest — and make smarter borrowing decisions.

Credit cards often have multiple interest rates depending on the type of transaction. Here’s what each one means.

Annual percentage rate (APR)

A credit card’s annual percentage rate, or APR, is the interest rate you’ll pay on a balance over the course of a year, expressed as a percentage. Credit cards typically have more than one APR because different rates apply to purchases, balance transfers and cash advances.

Fixed APR

An interest rate that does not fluctuate with changes to the lender’s prime rate. However, the issuer may still change the rate with proper notice under certain conditions, such as after a promotional period ends.

Variable APR

An interest rate that can change based on the lender’s prime rate. Most credit cards in Canada have variable APRs tied to the prime rate.

Purchase APR

The standard annual interest rate charged on purchases. Use our credit card interest calculator to run the numbers yourself.

Balance transfer APR

The interest rate applied to a balance transferred from one credit card to another. Some cards offer a 0% introductory APR on balance transfers for a set period — often the first six to 12 months after account opening.

Cash advance APR

The interest rate applied to cash advances. Cash advance APRs are typically higher than purchase APRs, and interest often begins accruing immediately.

Introductory APR

Also known as a promotional APR, this reduced interest rate applies for a limited time after a credit card is opened. Introductory APRs may apply to purchases, balance transfers or both.

Penalty APR

A higher interest rate that may be triggered if you miss payments — often after being more than 60 days late. A penalty APR can last for several months or longer, depending on issuer policies.

In addition to interest charges, credit cards may carry various fees.

Annual fee

Some credit cards charge a yearly fee for perks and benefits, like access to rewards programs, insurance offerings or premium features.

Foreign transaction fee

Also called a foreign exchange fee, this charge applies when a transaction involves converting foreign currency into Canadian dollars. In Canada, foreign transaction fees are commonly around 2.5%. Some credit cards waive foreign transaction fees.

Balance transfer fee

A fee charged when you move debt from one credit card to another. This fee is typically a percentage of the transferred balance.

Cash advance fee

A fee applied when you withdraw cash from your credit card or make a purchase that is treated as a cash equivalent.

Late-payment fee

A fee charged when you make a payment after the due date. Late payments may also trigger a penalty APR.

Over-limit fee

A fee that may apply if you exceed your credit limit, though many Canadian issuers no longer charge over-limit fees.

Dishonoured payment fee

Also known as a returned payment fee, this applies if a payment is rejected due to insufficient funds.

Inactive account fee

A fee that may be charged if your credit card account remains unused for an extended period.

Replacement fee

Some issuers may charge a small fee to replace a damaged or lost credit card.

These terms explain how your account operates month to month, including billing, balances and repayment rules.

Billing cycle

Also called a billing period, this is the time between credit card statements — usually about one month.

Balance

The total amount you owe to your credit card issuer.

Statement

A record of all transactions, payments, interest and fees during a billing cycle.

Statement balance

The total amount owed at the end of a billing cycle, as shown on your credit card statement.

Current balance

Your real-time account balance, including recent transactions that may not yet appear on your latest statement.

Credit limit

The maximum amount you can charge to your credit card.

Available credit

The portion of your credit limit that remains unused.

Minimum payment

The smallest amount you must pay each month to keep your account in good standing. It’s often a fixed dollar amount or a percentage (typically 1% to 3%) of your balance, whichever is greater.

Due date

The date by which your minimum payment must be received to avoid late fees and potential penalty interest.

Grace period

The period during which you can pay your statement balance in full without incurring interest. Most Canadian credit cards offer a grace period of at least 21 days.

Balance transfer

The act of moving debt from one credit card to another, often to take advantage of a lower interest rate or promotional offer.

Cardholder (primary cardholder)

The individual legally responsible for the credit card account and repayment of any debt.

Authorized user

Someone permitted to use the credit card account but not legally responsible for repayment. Joint credit cards, where two people share equal responsibility for the debt, are structured differently and are less common.

Credit card agreement

The legal contract between you and your credit card issuer that outlines interest rates, fees, repayment rules and account responsibilities.

If your credit card offers rewards, these are the key terms to understand.

Rewards program

A program offered by credit card issuers that allows cardholders to earn rewards on eligible purchases. Rewards may include cash back, points or travel miles.

Points

A common rewards currency earned on eligible purchases. Points can typically be redeemed for travel, merchandise, gift cards or statement credits.

Miles

A rewards currency sometimes associated with travel credit cards. Miles are often redeemable for flights or transferable to airline loyalty programs.

Cash back

A type of credit card reward that returns a percentage of eligible purchases to the cardholder. Cash-back rewards may be issued as a statement credit, direct deposit or cheque.

Welcome bonus

A promotional reward offered to new cardholders who meet a minimum spending requirement within a set period after opening an account.

Redemption

The act of exchanging rewards — such as points, miles or cash back — for travel, merchandise, statement credits or other benefits.

These terms may not appear directly in your card agreement but are closely tied to how credit cards affect your financial profile.

Credit bureau

Companies that compile financial information to produce credit reports and credit scores. In Canada, the two major credit bureaus are Equifax and TransUnion.

Credit report

A record of your borrowing history and repayment activity, maintained by a credit bureau.

Credit score

A three-digit number, typically ranging from 300 to 900 in Canada, that reflects how you manage debt. Generally, a score of 660 or higher is considered good.

Hard credit check

A credit check is performed when you apply for new credit. Hard inquiries may temporarily lower your credit score.

Soft credit check

A credit check that does not affect your credit score, such as when checking your own credit.

Credit utilization ratio

The percentage of your available credit that you’re currently using. Keeping your credit utilization below 30% may positively affect your credit score.

Your credit card agreement is a legal contract between you and the issuer. Understanding the key terms can help you avoid unnecessary fees, manage interest costs and protect your credit score.

Failing to follow your card’s terms — such as missing payments or exceeding your credit limit — could result in fees, higher interest rates or account closure.

Where to find your credit card’s terms

You’ll typically receive a copy of your credit card agreement when your card is issued. You can also request a copy from your provider or find it on the issuer’s website.