Fight sneaky credit card fees

It came as a shock to a pal when she found a $10 “inactivity fee” on a recent credit card statement. The way she saw things, she was being fined for not shopping enough. Huh?

Turns out that a lot of credit-card issuers charge such a fee — as much as $25 in some cases -- when an account hasn’t been active. It’s one of those fine-print details that people need to pore over when they get any new form of credit.

“Read your agreements,” advises Jeffery Schwartz, executive director of Consolidated Credit Counseling Services of Canada. True, you might need a magnifying glass and some time, but it’s worth it to avoid any surprises.

Also called “dormant account fees”, inactivity fees (if any) will show up in the credit card terms and conditions. And if it’s a new fee, the issuer is required by law to inform consumers in writing 30 days before the change takes effect.

“If there hasn’t been any activity on your credit card for a period of time -- typically one year -- some credit card issuers will charge a fee for maintaining an inactive account, or may even close the account,” Schwartz says.

Not sure where to look for credit resources? An easy way to compare credit-card fees is to check out the Financial Consumer Agency of Canada.

Disputing a fee

What can consumers do if a charge shows up on their bill that they disagree with? There are a few steps people can take.

Determine the source
Companies like Visa themselves don’t issue cards, extend credit, or set rates and fees, explains Erin Sufrin of Visa Canada’s corporate and public affairs department. Rather, this is done by card-issuing banks, such as CIBC, RBC, TD Canada Trust, Scotiabank, and the like. (Attempts to solicit comments from MasterCard were unanswered.)

Speak to the credit-card issuer first
“Try and solve the problem directly with the creditor,” Schwartz says. “They’re running business, and typically they appreciate your business if you’ve got a decent credit history. They’re usually amenable to solving problems because they don’t want to lose you as a client.”

Contact the ombudsman
“If you’ve exhausted all efforts to work it out with the creditor directly, typically they have an ombudsman,” Schwartz notes. “They will look at things and weigh both sides and try to come up with solutions.”

There are still other places to turn for guidance if neither the financial institution nor the ombudsman came through. "If you have a complaint, escalate your concern until you get satisfactory resolution,” says Patricia White, executive director of Credit Counselling Canada/Conseil en credit du Canada. She points to the Office of the Superintendent of Financial Institutions and/or the Financial Consumer Agency of Canada.

Think twice before cancelling your card

Maybe out of frustration you swear it’s time to cut up that credit card and cancel it. Be careful, because doing so can impact your credit rating.

“More and more lenders are looking at your credit profile and your credit score to identify your capacity to meet obligations on your debts,” Schwartz says. “This [cancelling a card] could hurt your credit score," he warns.

The easiest way to avoid an inactivity fee and to keep your credit in check is to use the credit card periodically, which will also prove to your lender that you can maintain a healthy relationship with credit for an extended period of time. A monthly gym membership or magazine subscription are examples of reoccurring, automated charges that help to keep a card active.

"That way the account stays active and open, and can potentially build good credit history. Essentially, if a card is being used, keep it: use it and pay it down monthly," Schwartz says.

If, on the other hand, you want to cancel a card simply because you can’t control your spending, that’s another issue.

“It’s better to reduce the temptation, the opportunities to spend, and to learn money management to get finances in order in a positive way,” Schwartz says.