C. Interests, finance charges, other fees and charges

C. Interests, finance charges, other fees and charges

Banks are required to make available to cardholders information about the interests, finance charges and other fees and charges relating to the use of their credit cards. Some of these charges may be significant in amount. A cardholder should check the fees and charges table of a bank to understand in advance what and how much fees and charges are payable and how they are triggered, in particular if the cardholder wants to avoid incurring them (section 29.5(k) and (l) of the Code of Banking Practice).

Common types of fees and charges relating to credit cards include:

1. Annual fee 

A bank may charge an annual fee. This is usually a flat fee payable by the cardholder every year to maintain the credit card. The bank may waive the annual fee in some cases.

2. Late payment fee

A cardholder is required to pay for its card transactions on a monthly basis. The credit card statement issued by the bank to the cardholder will set out the total amount payable, the minimum payment amount, the payment due date, and other information. 

If the cardholder pays the total amount in full or at least the minimum payment amount, the late payment fee will not be charged. However, the late payment fee will be charged if the cardholder does not pay at least the minimum payment amount. 

The bank may charge a late payment fee not exceeding the minimum payment amount. 

3. Finance charge on card transactions and cash advance

If the cardholder does not pay the total amount set out in the credit card statement in full on or before the payment due date, the bank will impose a finance charge. Finance charge is the interest accruing on the outstanding balance owing by the cardholder to the bank. 

If there is an existing outstanding balance on the credit card account, the finance charge (i.e. interest) will accrue on the amount of the outstanding balance plus the amount of new card transactions for the month. If there is no existing outstanding balance on the credit card account, the finance charge will not accrue on the new card transactions for the month (i.e. interest-free period). 

Cash advance refers to the withdrawal of cash by the cardholder on the credit limit of its credit card. The finance charge will accrue on a cash advance upon withdrawal. There is generally no interest-free period for cash advances. 

4. Cash advance handling fee

Banks will usually charge a handling fee for processing a cash advance. 

5. Over credit limit fee

A bank is required to obtain the cardholder’s prior consent before providing an over credit limit facility to them. The bank also has to provide channels for cardholders to opt out of the over credit limit arrangement at any time after. For cardholders who have not opted out of the arrangement, the bank should not charge more than one over credit limit fee per billing cycle.

A bank may charge an over credit limit fee which is usually a flat fee.   

6. Foreign transaction fee

Most credit cards are single-currency cards. If a cardholder uses a HK$ credit card to purchase goods and services in a currency other than HK$, a foreign transaction fee will be charged. This fee will be calculated based on the applicable exchange rates. 

7. Balance transfer fee

Some banks allow the cardholder to transfer the credit card account balance to another card or account. The balance transfer fee is a fee charged by the bank in this case.