Each Type of Credit Card Fee Explained

Before you apply for a credit card, it’s important to be aware of each type of credit card fee. There are many fees associated with credit cards, ranging from annual fees and foreign transaction fees to overlimit fees and authorized user fees. Understanding what these fees are and when they apply is crucial to being a responsible credit card holder.

Keep reading to learn more about each type of credit card fee, which is summarized in the following table.

Credit Card Fee TypeSummary
Administrative FeesVarying fees applied by issuers for activities like inactive accounts, dishonoured payments, or statement copies.
Interest FeesCharged when balance is not paid in full by the monthly deadline, and is usually the most expensive fee associated with credit cards.
Foreign Transaction FeesFee applied when making purchases in a foreign currency, typically between 1.5% and 2.5% of the purchase. Can be avoided with travel credit cards.
Annual FeesYearly fee often waived the first year as part of sign-up bonus, can range from $20 to over $150.
Overlimit FeesFee charged when exceeding credit limit in a billing cycle, usually between $25 and $30.
Authorized User FeesFee applied when adding an authorized user to have access to the same credit card.
Summary of each credit card fee type

Administrative fees

Many credit cards come with a range of administrative fees. These fees could include inactive account fees, dishonoured payment fees, or even statement copy fees. Ultimately, administrative fees vary between issuers, so it’s important to read the fees section of the credit card application carefully. 

Interest fees

Interest fees are another type of fee that might come with having a credit card. If you fail to pay your credit card balance in full by the monthly deadline, you will be charged interest on the amount that remains. Interest rates vary but are typically the most expensive fees associated with credit cards, so it’s important to avoid them at all costs. This means never charging more to your card than you can afford to pay for so that you can always make payments on time and in full.

Foreign transaction fees

A third type of credit card fee is foreign transaction fees. As the name suggests, this is a fee that applies if you make a purchase in a foreign currency (note: it doesn’t matter if you are located in Canada at the time of the purchase or not). In essence, a foreign transaction fee is intended to cover the currency conversion service that your issuer provides.

Foreign transaction fees often fall between 1.5% and 2.5% of the purchase. You can avoid foreign transaction fees by not using your credit card abroad and only purchasing items in Canadian dollars. However, if this is impossible (i.e. if you travel frequently), then purchasing a travel credit card with perks like no transaction fees could be worthwhile. 

Annual fees

Annual fees are another fee associated with most credit cards. Annual fees are due once per year. However, they are often waived the first year you open your credit card as part of your sign-up bonus. If your annual fee is waived in the first year, it will appear on your first credit card statement the following year. Pay close attention to the annual fees before applying for a credit card. Some can be as little as $20 per year while others can be upwards of $150. 

Overlimit fees

Next, overlimit fees are credit card fees charged when you go over your credit limit in one billing cycle. Anytime you make a purchase that pushes you over your credit limit, you will be charged this fee. Fees range between financial institutions but often range between $25 and $30. 

Authorized user fees

Authorized user fees are a type of credit card fee that comes into play if you want someone else to have access to the same card. For example, if you want your spouse or adult child to be an authorized user and gain access to a secondary card attached to your primary credit card, a fee will apply. 

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