There are a number of reasons that rewards credit cards typically cost more than no-frills accounts, according to a report from the Los Angeles Times. The first is that they typically come with far higher interest rates than normal credit cards, which can become problematic if the cardholder carries a balance from one month to the next. In addition, some of these cards also carry annual fees that others may lack.
[Featured Product: Looking for credit cards for bad credit?]
In addition, these accounts are slightly more expensive for lenders to maintain due to their giving back money or rewards for spending on the accounts, the report said. As a result, lenders often charge merchants more for processing purchases made using these accounts, which then trickles down to consumers in the form of higher prices, which can be especially problematic for consumers who opt to pay in cash.
However, many lenders are now increasing the benefits of their rewards accounts, according to a report from USA Today. As a consequence, these cards may allow consumers to find additional value when using them.
[Featured Tool: Get your free Credit Report Card from Credit.com]
Image by AndresRueda: CreditCards, via Flickr