Credit card basics

Every time you use your CIBC credit card to make a purchase, you're borrowing money from CIBC. As with any loan, there are important details that you should be familiar with.

As a starting point, understanding some of the basic terminology that is used in reference to credit cards is important.


Annual fee - A fee some credit card companies charge for having the card and its benefits

Annual interest rate - When you have not paid off purchases in full by the payment date on your credit card bill, you carry a balance forward from the previous month. The annual interest rate is the rate of interest charged on the balance you carry forward.

Account balance - Your total account debt as of your statement date taking into account your previous balance:

  • Minus any payments you had made since your previous statement
  • Plus new purchases and cash advances
  • Plus interest charges and other fees

Credit Limit - Your credit limit is the amount of credit assigned to your account. How your credit limit is determined is based on your previous credit behaviour and a number of other factors such as:

  • Monthly income
  • Current debt (credit cards, student loan, line of credit, etc.)
  • Home ownership
  • Length of time at your current residence
  • Length of time at your current employer
  • Number of times you have obtained credit (it may be harder to get a high credit limit if it's your first time, since you won't have a credit history)
  • How much credit you need or use
  • Previous debt repayment history - have you made minimum payments on time or defaulted

Grace period - The number of days between the statement date and the date you have to pay before you are charged interest, provided that (with the exception of Quebec) you paid off your full balance in the previous month.

Minimum payment - The smallest amount you are required to pay by your payment due date to ensure your account remains in good standing. This is indicated on your statement as the "Current month's minimum payment".

Overlimit fee - A fee charged for exceeding your credit limit. Exceeding your limit may damage your credit record since it's considered a breach of your credit agreement.

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