Fees & Charges for Credit Card Usage
Learn fees and charges for credit-card usage for NSW Year 12 Mathematics Standard 2. You add up the costs of using a card — the annual fee, cash-advance and late-payment fees, a foreign-transaction fee on overseas spending and GST — to find its true yearly cost.
You will total each card's yearly cost, compare two cards to see which is cheaper and by how much, and find the break-even usage where they cost the same — core loans-and-credit skills for Standard 2 financial mathematics.
Theory
Fees and charges for credit-card usage is part of the loans and credit topic in Year 12 Standard 2 (NSW). This guide shows how to total a card's costs — the annual fee, cash-advance and late-payment fees, the foreign-transaction fee and GST — to find the yearly cost, then compare cards and find the break-even usage.
Credit-card fees and charges are the costs a bank adds for using a card. The main ones are the annual fee (a flat yearly charge), per-use fees such as a cash-advance fee for each withdrawal and a late-payment fee for each missed due date, and percentage charges like a foreign-transaction fee on overseas spending.
A flat fee is added once each time it applies, so you multiply it by how many times it happens. A percentage fee is worked out on the amount involved: a foreign-transaction fee is a percentage of the converted AUD amount, and GST of \(10\%\) is sometimes added to a fee.
In this Year 12 Standard 2 (NSW) topic you total all the charges to find a card's true yearly cost, then compare cards for your own usage. The usage at which two cards cost the same is the break-even point.
Add every charge the card makes over the year:
A foreign-transaction fee is a percentage of the converted amount:
When \(10\%\) GST is added to a fee:
How to work out and compare card costs
- List every charge: the annual fee, each per-use fee (cash advance, late payment) and any percentage fee.
- Per-use fees: multiply each flat fee by how many times it applies.
- Percentage fees: multiply the rate by the amount (foreign spending), and add \(10\%\) GST to a fee by multiplying by \(1.10\).
- Total and compare: add everything for each card; the smaller total is cheaper. Set the totals equal to find the break-even usage.
Add the annual fee to the per-use charges.
| \(\text{annual fee}\) | \(=\) | \(\$180\) |
| \(\text{cash advances}\) | \(=\) | \(4 \times \$3.00 = \$12\) |
| \(\text{late payments}\) | \(=\) | \(2 \times \$18.00 = \$36\) |
| \(\text{total}\) | \(=\) | \(180 + 12 + 36 = \$228\) |
Maya's total yearly cost is \(\$228\).
The fee is a percentage of the converted amount; add it on for the total.
| \(\text{(i) fee}\) | \(=\) | \(3\%\times\$180\) |
| \(\) | \(=\) | \(0.03 \times 180 = \$5.40\) |
| \(\text{(ii) total}\) | \(=\) | \(\$180 + \$5.40 = \$185.40\) |
The fee is \(\$5.40\) and the total charged is \(\$185.40\).
Total each card's annual fee, cash-advance fees and foreign fee, then compare.
| Card A | Card B | |
|---|---|---|
| Annual fee | \(\$60\) | \(\$0\) |
| Cash-advance fee | \(\$2\) each | \(\$4\) each |
| Foreign fee | \(3\%\) | \(2\%\) |
| \(\text{Card A}\) | \(=\) | \(60 + 20\times2 + 3\%\times600 = \$118\) |
| \(\text{Card B}\) | \(=\) | \(0 + 20\times4 + 2\%\times600 = \$92\) |
| \(\text{saving}\) | \(=\) | \(118 - 92 = \$26\) |
Card B is cheaper by \(\$26\).
Set the two yearly totals equal and solve for \(n\).
| \(75\) | \(=\) | \(3n\) |
| \(n\) | \(=\) | \(25\) |
At \(25\) cash advances both cost \(\$75\); fewer favours Card B, more favours Card A.
Common pitfalls
Frequently asked questions
What fees can a credit card charge?
Common credit-card fees are the annual fee (a flat yearly charge), a cash-advance fee each time you withdraw cash, a late-payment fee each time you miss the due date, and a foreign-transaction fee, which is a percentage of overseas spending. GST may be added to some fees.
How do you work out a foreign-transaction fee?
Multiply the fee rate by the converted Australian-dollar amount. For example, a 3% foreign-transaction fee on a purchase that converts to $180 AUD is 0.03 times 180, which is $5.40. The total charged to the card is $180 plus $5.40, or $185.40.
How do you compare two credit cards?
Total each card's yearly cost for your own usage: add the annual fee, each per-use fee multiplied by how many times it applies, and any percentage fees. The card with the smaller total is cheaper for you.
What is a break-even point for two cards?
It is the level of usage at which the two cards cost exactly the same. You find it by setting the two yearly totals equal and solving. Below that usage one card is cheaper; above it the other card becomes cheaper.
Is the card with no annual fee always the cheapest?
No. A card with no annual fee often charges higher per-use fees, such as a larger cash-advance fee. If you use those services a lot, a card with an annual fee but lower per-use fees can work out cheaper, so total both cards.
How is GST added to a credit-card fee?
GST of 10% is added by multiplying the fee by 1.10, or by working out 10% of the fee and adding it on. For example, a $90 annual fee plus 10% GST is 90 times 1.10, which is $99.