How Do Credit Card Payments Work in Canada

Nowadays, having a credit card is practically a need. If you’re just getting started, making regular, monthly payments on a credit card is a terrific way to build a credit history and a good credit score.

Read further for everything you need to know about credit card payments.

What is a Credit Card Balance?

When you use a credit card to make a purchase, the amount you charge is added to the total amount you owe, which is known as your credit card balance. Your balance, on the other hand, is more than just the sum of your purchases. It also includes any balance-related interest you owe, as well as any fees or penalties levied by your card issuer. The following may be charged:

annual fees
cash advance fees
international transaction costs
late payment penalties
various other fees

At the end of each monthly billing cycle, the card issuer will tell you how much you owe, the minimum payment, and when that payment is due. If you pay the minimum amount and on time, you’ll maintain excellent credit with your creditor. The remaining balance is then carried forward to the next month’s balance when interest is accrued. As a result, paying more than the minimum payment each month and, ideally, paying off your balance in full is preferable.

If you merely make the minimum payment and roll your balance over to the next month, your credit score will not be affected. However, if your balance is excessively high compared to your entire credit limit, this could be a problem. When considering how risky it is to lend money to you, potential lenders look at your credit utilization ratio. Someone who frequently uses their credit card to its limit would appear less financially secure than someone who retains a significant portion of their available credit in reserve.

In evaluating your credit score, your credit utilization ratio is also a significant component. A healthy ratio is usually 30% or less, so if you have a $5,000 credit limit on your credit card, you should attempt to keep your balance around $1,500.

How Interest Rates on Credit Cards Work

An annual percentage rate (APR) is used to determine the interest that your credit card company charges you. The APR is divided by 12 and applied to your outstanding balance each month because it is an annualized percentage. A credit card with a 20% APR, for example, charges you around 1.66% interest each month on your outstanding debt.

This is an example of a regular revolving credit card, which allows you to carry a balance from one payment month to the next. Another card, known as a charge card, resembles a credit card in appearance and functionality but requires you to pay the entire balance each month.

Some credit cards contain several APRs, for example, one for cash advances and another for purchases. All of this gets set out in your credit card’s terms, which you get when you open your account. You can also find a credit card’s terms online if you’re looking for one.

Many of the fees and penalties associated with credit cards can be avoided. However, if you’re not careful, they could end up accounting for a significant portion of your monthly payments.

Credit Card Fees: What You Should Know and How to Avoid Them

Credit cards typically come with a lot of fine print about penalties, fees, and other charges that you can accrue, sometimes unintentionally. Here are a few significant ones to be aware of:

Late fees: You may be charged a late fee if you fail to make your minimum payment by the due date. The first late payment can cost little, and future late payments can become costly. Furthermore, credit bureaus will record late payments and display them in your credit history, potentially harming your credit score.
Over-limit fees: Your credit card issuer may charge you an over-limit fee if you exceed the credit limit on your card. This fee varies depending on how often you go over your limit. When you try to make a transaction, some card issuers will decline any charges that exceed your credit limit.
Annual fees: This is the yearly charge for having the card. Many credit cards don’t have annual fees, but those that do may have rewards programs that give you more money back on your purchases.
Cash advance fees: Cash advances are available on several credit cards. This fee usually gets calculated as a percentage of the money you receive, which can be rather costly.
Returned payment fees: This is the fee you’ll get charged if your credit card payment bounces due to insufficient funds or other reasons.

Merchant Credit Card Surcharges

As of September 2026, a Canadian merchant can add a surcharge when you pay with a credit card, except in Quebec. Visa's rules have allowed it since October 6, 2022, following a court-approved settlement.

According to the Financial Consumer Agency of Canada (FCAC), these surcharges follow specific rules:

Cap: no more than 2.4% of the purchase, and never more than what it costs the merchant to accept the card.
Disclosure: the merchant must post the surcharge at the store entrance, at the point of sale (in store and online) and on every receipt.
Before you pay: you must be told before the payment is processed, so you can cancel the purchase or pay another way.
Cards covered: credit cards only. Visa prohibits surcharges on its debit and prepaid cards.
Returns: under Visa's rules, the surcharge is refunded along with the purchase.

Surcharges Are Banned in Quebec

Quebec's Consumer Protection Act prohibits merchants from charging a fee because you pay by credit or debit card. The advertised price must be the price you pay; only taxes such as the GST and QST can be added. According to the Office de la protection du consommateur, a sign near the checkout or a verbal warning does not make the fee legal.

How to Avoid Surcharges

Outside Quebec, the simplest option is to pay with cash or debit, or to shop with a merchant that doesn't add a surcharge. In addition, a rewards card rarely offsets the fee: 2% cash back on a $100 purchase earns $2, while a 2.4% surcharge costs $2.40.

Conclusion

Credit cards are an excellent method to build a good credit history, but you must be careful not to overspend and wind up in debt. It’s essential that you make the required minimum payment instead of missing a payment.

However, the more of your card’s balance you can pay down, the less interest you’ll have to pay. If you can, paying your required monthly credit card amount every month will give you convenience and other benefits of a lower-cost credit card.

Compare

American Express Cobalt^® Card

American Express Amex Membership Rewards

Annual fee: $191.88
Our valuationMilesopedia first-year estimate First-year valueWelcome bonus$255Total$255Rewards on your spending are not included. The calculator that adds them from your own profile is on the card's page.: $255
Welcome offerGet 1,250 points after $750 in purchases per month for 12 months: Up to 15,000 points

The American Express Cobalt^® Card is a versatile American Express card, whether you want points for travel or cash back.

American Express Cobalt^® Card welcome offer

The welcome bonus is paid out monthly over your first 12 months. You earn 1,250 Membership Rewards points for each monthly billing period in which you charge $750 in net purchases to your card, in any category (1X, 2X, 3X or 5X). That adds up to 15,000 Membership Rewards points over the year, a welcome offer valued at $255.

Earning the full bonus means $9,000 in net purchases spread across 12 monthly billing periods. This offer rewards steady monthly spending rather than one large purchase.

You can use these points as statement credits on everyday or travel purchases, at the same rate either way: 1,000 points = $10.

You can also transfer them to Aeroplan, Avios (British Airways and Qatar Airways), Flying Blue, Marriott Bonvoy or Hilton Honors. With the full welcome bonus, that is a choice between:

15,000 Aeroplan points
15,000 Avios points
15,000 Flying Blue Miles
18,000 Marriott Bonvoy points

American Express Cobalt^® Card benefits

Here is what the card gives you, starting with the benefits cardholders use most.

5X points on eligible eats and drinks in Canada: groceries, restaurants and bars, and home food delivery. A spend cap applies.
3X points on eligible streaming subscriptions in Canada.
2X points on eligible gas, public transit and ride sharing purchases in Canada.
1 additional point on eligible hotel and car rental bookings made through American Express Travel Online.
1X point per dollar on everything else, with no category restrictions.
Points that hold the same value either way: 1,000 points = $10 as a statement credit, or a 1:1 transfer to several airline and hotel loyalty programs.
No minimum income requirement, as with every American Express Canada card.
Additional cards at no extra cost: the first and every other supplementary card is $0.
The Hotel Collection: a room upgrade when available, 12pm check-in and late check-out when available, and up to $100 USD in hotel credit on amenities charged to the room for a stay of two or more consecutive nights, booked through American Express Travel.
Front Of The Line^® presale and reserved tickets for concerts and theatre performances, plus offers and events curated for cardmembers through Amex Experiences.
A soft credit check before you apply: you can see whether you will be approved with no impact to your credit score. This applies to American Express personal card applications.

The 5X categories and where they apply

The 5X rate is the reason most people carry this card. In Canada it covers three kinds of merchants:

Groceries: Metro, IGA, Sobeys, Super C, Safeway, Whole Foods.
Restaurants and bars: sit-down meals, takeout and drinks.
Home food delivery.
Convenience stores (Couche-Tard, 7-Eleven): not part of 5X, 1 point per dollar.

The 2X rate covers gas stations such as Esso, Shell and Petro-Canada, along with public transit and ride sharing.

With the American Express Cobalt^® Card, you earn between 1 and 5 points per dollar:

Category	Points per dollar
Grocery (Metro, IGA, Sobeys, Super C, etc.)	5
Home food delivery	5
Restaurants and bars	5
Convenience stores	1
Streaming services	3
Service station	2
Transport	2
Travel	1
Other	1

That works out to a 1 to 5% return on those purchases. For example, if you spend $1,000 per month across groceries, restaurants and food delivery, you earn $50 back per month, or $600 per year from that category alone. Transfer the points to a program such as Aeroplan instead and the return can be higher.

You can also stack these categories with the hundreds of stores that offer 5x points.

American Express Cobalt^® Card insurance coverage

The card comes with a broad insurance package. The amounts below are the coverage limits; conditions, age limits and exclusions are set out in the certificate of insurance linked in the Insurance section above.

Travel insurance

Emergency medical: up to $5,000,000 for the first 15 days of a trip.
Travel accident: accidental death and dismemberment of up to $250,000 for you, your spouse and dependent children under age 23 when travelling on a common carrier (plane, train, bus or ship) and the tickets are charged to your card. Supplementary cardholders and their families are covered too.
Flight delay: up to $500 for necessary hotel, meal and sundry expenses bought within 48 hours when you are delayed or denied boarding for four hours or more and no other transportation is available. This $500 is an aggregate limit per occurrence, shared with missed connection and delayed baggage coverage.
Delayed baggage: up to $500 for essential clothing and sundries bought within four days when your outbound luggage is delayed six hours or more. This $500 is an aggregate limit per occurrence, shared with missed connection and flight delay coverage.
Lost or stolen baggage: up to $500 per occurrence for all insured persons combined, for checked or carry-on baggage and personal effects in transit, when the airline tickets are charged to your card. Within that limit, jewellery is capped at $300 per occurrence and golf clubs, including golf bags, at $250 per occurrence.
Hotel and motel burglary: up to $500 against the loss of most personal items if your hotel or motel is burglarized, when the stay is charged to your card.

Rental car insurance

Theft and damage coverage is included for a rental car with an MSRP, for its model year, of up to $85,000 excluding all taxes, for rentals of up to 48 days. To use it, decline the Loss Damage Waiver (LDW) or any similar option from the rental company and charge the full rental to your card. There is no cost for this coverage, and it replaces the daily insurance the rental company charges, usually $16 to $23 per day.

Mobile device insurance

Your device is covered for up to $1,000 per occurrence when it is charged to the card, for up to two years from the date of purchase. The payout is based on the depreciated value of the device, which falls by 2% of the purchase price for every completed month, less a 10% deductible. Theft and accidental damage coverage starts on the 91st day after purchase, because the first 90 days are covered by purchase protection.

Purchase protection and extended warranty

Eligible items charged to your card are insured against accidental physical damage or theft for 90 days from the purchase date, up to $1,000 per occurrence for all items combined. The card also extends the original manufacturer’s warranty by up to one additional year on eligible items, with indemnification limited to $10,000 per insured item and $25,000 per Cardmember per policy year for all items combined.

American Express Cobalt^® Card fees

Card fee: $15.99 per month, which equals $191.88 per year, for residents outside Quebec. Quebec residents are billed $191.88 per year.
Additional cards: $0.
Purchase interest rate: 21.99%.
Cash advance interest rate: 21.99%.
Foreign transaction fee: 2.5%.
Minimum income required: none.

Because the fee is billed monthly rather than in one annual charge, you can stop and restart the cost in step with how much you are actually using the card.

Legal

American Express is not responsible for maintaining or monitoring the accuracy of information on this website. For full details and current product information, click the Apply Now link. If you apply and get approved for an American Express Card, we may receive compensation from American Express, which can be in the form of monetary payment.

Annual fee

Primary card$191.88

Additional card$0

Annual income required

Individual$0

Household$0

Conversion fees

2.5%

Earning rate

5xRestaurants
5xGroceries
3xStreaming
2xTransit
2xGas
1xAll spending

Value

1st Year Value$1,675

2nd Year Value$799

Transfer partners

AeroplanAirline
British Airways ClubAirline
Cathay Asia MilesAirline
Etihad GuestAirline
Flying BlueAirline
Hilton HonorsHotel
Marriott BonvoyHotel

Travel insurance

Travel medical (under 55)Up to $5,000,000 / 15 days

Travel medical (55-64)Up to $5,000,000 / 15 days

Delayed BaggageUp to $500

Lost BaggageUp to $500

Flight DelayUp to $500

Hotel BurglaryUp to $500

Travel AccidentUp to $250,000

Purchase protection

Purchase ProtectionUp to $1,000 / 90 days

Extended Warranty+1 years

Mobile DeviceUp to $1,000 / 2 years

Auto Rental Collision (primary)Up to $85,000 / 48 days