Before you get a credit card, make sure you understand all the associated costs and fees. The most common cost you’ll encounter is an annual fee, but even no-annual-fee cards have associated fees. It’s not always easy to tell what those fees are and when you’ll face them.
How much does an annual fee credit card cost?
There’s a wide range of how much a credit card with an annual fee can cost. Generally, the more perks, features and benefits it has, the higher its annual fee. So, while a simple cashback credit card might run you $50 to $100 a year, a top tier travel card can reach as high as $500+.
A higher annual fee can net you a wealth of useful benefits that make up for the cost of the card. For example, the American Express AIR MILES Reserve Credit Card offers hundreds of dollars of statement credits on common travel expenses each year, as well as other perks such as access to luxurious airline lounges. The Scotia Momentum Visa Card, on the other hand, has a $39 annual fee after the intro period and simply offers a solid intro APR, solid cash back rewards, discounts on car rentals and purchase protection.
What are some other credit card costs?
Aside from an annual fee, credit cards can carry a variety of other costs, such as foreign transaction fees, or penalties for misuse. Here are some common fees you may encounter:
Interest. If you carry a balance on your credit card, you’ll need to pay off the interest that accrues as a result. This interest is determined by your card’s purchase APR.
Foreign transaction fees. A card may charge a percentage of your purchase toward a transaction made outside of Canada. This is usually around 1-3% of the purchase.
Balance transfer fee. If you transfer a balance to a new credit card, you may have to pay a flat rate or percentage of the amount transferred.
Cash advance fee. Some cards charge a flat rate or percentage fee based on the cash advance amount you take out.
Late payment fee. If you fail to make a monthly payment on time, you can expect a penalty fee. These are typically around $25 to $38 tacked on to your balance.
Finance charge. This is the interest that accrues if you don’t pay your balance in full each month.
Over-limit fee. You might get slapped with an over-limit fee if you make a purchase that pushes your account over your credit limit.
Returned payment fee. Some cards may charge a penalty fee if a payment you make to your card is rejected or returned for any reason.
Tangerine Money-Back Credit Card
Tangerine Money-Back Credit Card
Purchase interest rate
Eligibility criteria, terms and conditions, fees and charges apply
Tangerine Money-Back Credit Card
Apply today and earn 2% cash back in up to 3 spending categories of your choice including gas, groceries and 8 more.
Purchase interest rate: 19.95%
Cash advance rate: 19.95%
Balance transfer rate: 1.95% for the first 6 months, 19.95% thereafter
Make your payment on time every month One way to avoid interest fees is to pay your balance in full each month. It can help to calculate all of your finances before making any purchases on credit to ensure you can pay it off.
Make payments earlier than the due date Late payment fees are usually around $25-$38 depending on your issuer. Another fee that comes with credit card use is a bounced cheque fee, which can be as high as $50. This happens when you send out a cheque with insufficient funds in your account. To avoid these fees, make your credit card payments a priority and pay them off earlier than their due date.
Avoid cash advances. A cash advance fee will appear on your monthly statement if you withdraw money from an ATM. There is usually a flat fee charged in addition to a percentage of the amount withdrawn. Avoid making a cash advance if at all possible.
Always check the credit available in your card When you make a purchase, make sure you have the credit available on your credit card. If you go over your limit, you will receive an over-limit fee, usually between $25 and $35.
Review your card rates and fees ahead of time. Interest rates vary from card to card, but if you miss several payments your card might revert to a baseline rate. This could be a much more punishing rate than your initial APR and can start racking up the interest even faster.
Getting a credit card with no annual fee is a good way to keep your credit card costs down. That said, they still have associated fees to watch out for. Compare your options to find a card that’s right for you.
If used correctly, credit cards are an effective means of improving your financial flexibility and earning rewards. To make sure a credit card is more of a help than a hindrance, keep your costs down by using your credit card responsibly.
While you typically can’t avoid paying an annual fee, you can often use rewards earned through your card to pay the fee. Using a card’s benefits, such as statement credits, are also a way to offset the annual fee.
Steven Dashiell is a credit cards writer at Finder. He's worked on 250 Finder articles and counting, helping readers embrace and maximize credit cards. Backed by nearly a decade of research and reporting experience, Steve's work can be seen on Debt.com, CreditCards.com and Lifehacker.
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