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Rewards Credit Cards May be Problematic for Some

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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.

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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.

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  • Pam Ubrun

    I received a notice from Chase that the annual fee for my Marriott Rewards credit card will increase from $30. to $45.; that’s a 50% increase!!! I want to pay the balance in full and cancel the card. I am worried that (when I pay the balance in full and cancel the card) my credit score will be impacted. Is there a law that protects my credit score from being impacted when I choose not to continue my relationship with Chase?

    • Beverly Harzog

      Hi Pam–unfortunately, if you close your credit card account it will most likely have a negative impact on your score. I understand your frustration, though. Try calling Chase and explain that you don’t want to pay the increase in an annual fee. Ask Chase to either let you go back to the $30 fee (which it was you signed up for, right?) or at least see if they’ll waive the increase until next year. This strategy works best if you’ve been a stellar customer.

      Also, run the numbers and see if you still come out ahead with this card, even with the increase. If this truly is no longer a good fit for you, but you need a hotel-branded card, do a little research and see if you’d be better off with a different card.

      • Pam Ubrun

        As I suspected; just another hostage tactic by the credit card companies!!! Thanks for your suggestions, I will call Chase.

  • Alison

    I’ve had the Marriott Rewards card since before Chase took it over, maybe 20+ years, but I’m not going to pay $45 a year for a credit card I don’t use much. If they had offered to waive it this year I’d consider keeping the card, but they wouldn’t negotiate, so I canceled the account and tore up the card. I replaced it with an Amazon Rewards card which has no annual fee and they give you a $40 Amazon gift card to start! I’m already ahead $85 on this deal! The credit limit is MUCH smaller, but that’s not important to me since I never carry a balance.

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