Credit card companies want you to spend by their rules, and they're pulling out all the stops to get you to play along. But in the aftermath of the financial crisis, those rules are changing. With some cards, even getting in the door has become pricey.
Rolling out the red carpet
In an effort to snare new customers, card issuers have gotten creative with their offerings. Instead of simply bribing potential applicants with cashback rewards or frequent flier miles, companies are moving toward a pay-to-play model, with heightened service they hope will justify the high costs.
Once a pioneer in the trillion-dollar exchange-traded fund industry, Barclays
Obviously, Barclays isn't the first to offer cards with significant annual fees. American Express
So it makes sense that other issuers are rushing to join the party. According to The Wall Street Journal, Capital One
Should you dance?
Unfortunately, it appears that this trend of declining free rewards will continue for some time. Recently, Charles Schwab
Certainly, that's true from the card issuers' perspective. The recently enacted credit card reform laws have placed severe limitations on the ability of credit card companies to maximize income from those who carry balances on their cards every month. In response, card companies are looking for ways to get more revenue from those it considers "freeloaders": customers who pay off their balances every month.
Golden eggs? Who needs 'em?
What happens next depends on you and millions of other cardholders. For some people, the rewards that new premium cards will give them may outweigh what they have to pay -- and if you're one of them, then by all means, take full advantage. Yet keep in mind that if companies expected to lose money on these deals, they wouldn't do them. Paying hundreds of dollars up front is a big hurdle to overcome in comparison to the free cards that are still available, at least for now. Make sure it's worth the cost.
For many of us, paying for cards won't make sense. For now, there's no shortage of good free alternatives -- I still get offers every week throwing free miles at me. If those ever disappear, though, I won't hesitate to stop using credit cards. As long as card-issuing banks -- along with the merchant networks Visa
Are you with me or against me? What do you think about new credit card fees? Tell me all about it in the comments section below.
Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.