While it’s certainly possible to use a credit card without ever paying any fees, many cardholders will likely run into a fee now and again.
Here’s a roundup of the most common credit card fees and what you need to know about paying or disputing them.
Types of fees
Your fees will depend on the type of credit card you have and your issuer. Some fees, such as interest charges and annual fees, will be clearly stated on your monthly credit card statement. Other fees and additional charges, like foreign transaction fees, are not clearly highlighted on your statement or may be hidden in the fine print so it’s essential to read your credit card agreement. Ask your credit card issuer about any fee you don’t understand.
As of October 6, 2022, businesses across Canada (excluding Quebec) can charge customers a credit card processing fee when they pay for purchases with a credit card. The fee, also called an interchange fee, covers the costs of using credit card networks.
Previously, business owners were responsible for paying processing fees. But following a class action settlement, Visa and Mastercard agreed to give Canadian businesses the choice of whether to pass this fee on to customers.
Processing fees are capped at 2.4%, and not all businesses charge them. Businesses must disclose processing fees to customers at the point of transaction. These disclosures should be visible at storefront entries and on websites for online businesses. The fee will also appear as an itemized dollar amount on your receipt.
Usually, you’ll only run into annual fees with premium credit cards that offer extra benefits like rewards and cash back, as well as other perks like a strong insurance package, entertainment extras and airport lounge access. While many people are adamantly opposed to paying an annual fee, the benefits can far outweigh the costs if you use many of the card’s extra features or can rack up a lot of rewards or cash back. Make sure the annual fee is worth it before deciding.
Cash advance fee (aka cash equivalent fee)
When you use your credit card to withdraw cash from an ATM, called a cash advance, some credit card providers will charge a small cash advance fee (also called a cash equivalent fee), which might be a fixed amount, a percentage of the amount of the cash advance, or a combination of both.
This is one fee you really want to avoid, however, because cash advances are typically subject to a higher rate of interest than other purchases, in addition to the cash advance fee. Furthermore, unlike with your unpaid credit card balance, with a cash advance, there is no interest-free grace period — you start accruing interest immediately on your withdrawal.
Unlike a set credit card fee, interest is charged based on either your unpaid balance or your cash advance amount. On your credit card statement, there will usually be a separate section for cash advance interest charges versus interest you’re charged on your overall balance.
Foreign currency conversion (aka foreign exchange fee)
Many credit cards in Canada charge a fee of about 2.5 per cent to convert any transactions in a foreign currency into Canadian dollars. This fee is usually rolled into the conversion rate and thus many cardholders are unaware they are spending an extra 2.5 per cent whenever they buy anything online or in-person that is not in Canadian dollars.
Your credit card provider may charge you for reprinted statements, though most credit card companies give you free access to previous statements for up to at least a year online.
It’s your responsibility to ensure you stay within your credit limit. If you do go over your limit you may be charged an over-the-limit fee. The fee ranges anywhere from $25 to $50 in each given statement period you’re over your limit. The only exception to this is if a merchant places a temporary hold on your credit card that goes over your limit but the charge itself is under the limit. For example, when buying gas or having groceries delivered.
Balance transfer fee
Some credit cards will allow users to transfer a balance from another credit card (usually to take advantage of a low-interest promotion), for a fee. This fee is typically a percentage of the amount transferred, though credit cards may offer promos whereby you can transfer your balance at no cost.
Dishonoured payment fee
If you issue a credit card cheque as payment and the cheque bounces because you don’t have enough credit available on your card, you’ll be charged a dishonoured payment fee. Likewise, you’ll pay this fee if a payment on your credit card balance doesn’t go through.
Inactive account fees
Some credit card providers charge an inactive account fee if you don’t use your credit card for a set period of time (usually a year or longer). Sometimes this fee only applies to credit cards that carry a balance.
If you lose your credit card you may be charged a fee to replace it, though many issuers will send you a new card at no cost.
Late payment fees
While some credit card companies may charge a late payment fee, many skip this fee. Instead, they may increase your interest rate, withdraw promotions, or even cancel your card.
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What about interest on fees?
Information about whether or not you’ll be charged interest on your fees can be hard to find as it’s not normally something credit card issuers clearly disclose in their credit card agreements. The best way to find out is to read your agreement carefully, ask the issuer about anything you do not understand, and contact your credit card provider to ask them what fees are “interest-bearing fees.”
Where to review charges and fees
Fees are usually clearly marked (with a few exceptions noted above, like foreign exchange fees) on your credit card statement. They should also be clearly listed on your credit card agreement in a section often called a “Disclosure Statement.” If you have any uncertainty about fees, the best option is always to call your provider directly. If you see any charges or fees you don’t understand, you can also dispute them by calling your credit card provider.