Credit card rewards programs are about to get worse for many people, with new fees and watered-down benefits. If you have great credit and charge a lot, though, you might not notice because card issuers still will compete fiercely for your business.

That's the consensus of the four credit card experts I asked to predict the future of rewards programs once the final provisions of credit card reform go into effect Feb. 22.

"One of the consequences of the (Credit Card Accountability, Responsibility and Disclosure Act) is going to be a much less lucrative reward card market," said Adam Jusko, the founder of Index Credit Cards. "Depending on your past credit habits, that may be just fine, or it may be cause for a bit of mourning.

People with poor credit — FICO scores below 620 — will have a hard time getting any credit card, let alone one with rewards. People with only fair credit will have "far fewer options than in the past," with higher interest rates and less-generous credit lines, said Ben Woolsey, the director of marketing and consumer research for CreditCards.com.

It's the prime and superprime customers who "will get the lion's share of offers and rewards," Woolsey said. Prime credit varies by lender but generally applies to people with FICO scores between 700 and 749. Superprime credit starts at 750.

You don't need to carry a balance to get attention if you're in that crowd, the experts said.

"You may not know it, but if you have a good-paying job and excellent credit and typically charge several thousand bucks or more on your card each month, you've got a big target on your back," said Curtis Arnold of CardRatings.com. "As issuers have become more risk-averse, revolvers (people who carry a balance) have fallen out of favor, and the new elite card customers have become highly coveted."

This change started with the recession, explained Bill Hardekopf of LowCards.com. As credit card defaults started to climb, card issuers began pulling back on riskier customers and abandoning some of their most generous rewards, such as 5% rebates on certain purchases.

Credit card reform is exacerbating those trends by cutting off issuers from unfair but profitable practices, such as retroactive rate hikes, universal default and the application of payments to the lowest-interest balances.

To make up for lost profits, card issuers are experimenting with new fees and tweaking rewards programs.

Here's what to watch for:

1. Rewards that buy less

Credit card companies pay for rewards programs largely through interchange fees that merchants pay on each transaction, Jusko said. A merchant might pay an interchange fee of about 1.5% for a regular credit card transaction, 1.65% for a rewards card transaction and 2.1% on one of the high-end rewards cards, such as Visa Signature.

"So one easy way to increase profits," Jusko said, "is to keep the interchange fees the same while watering down the rewards on the other end."

(Merchants have been protesting these fees, so far to no avail. If they can persuade Congress to wade in, rewards programs could be further affected.

Going forward, issuers are less likely to cut their advertised rebate amounts than they are to fiddle with the "back end" — the redemption process that actually determines the value of your points, miles and rebates. They might require you to earn more points or miles to get the same reward, for example, or set up tiers that require you to spend more to earn the same points.

"Most folks take notice when someone cuts their rebate from 3% to 1.5%, for example, but few consumers take the time to realize the grave implications of the fine print associated with a change-of-terms notice," Arnold said. "You can get what appears to be an insignificant notice that slightly alters your redemption options, but the end result may be the same in that your earning power is basically cut in half."

2. Gimmicks that 'pay' for new annual fees

At the height of the credit boom, annual fees disappeared from most non-airline rewards cards. Now they're coming back, but some issuers are trying to soften the blow with gimmicks that seem to pay for the fees.

"For example, a card with a $50 annual fee may come with 5,000 points that you can immediately redeem for a $50 gift card, or it may come with 10,000 frequent-flier miles," Jusko said. "These feel like rewards that are worth the annual fee to the consumer, but the card company has paid less than face value for them, so it's actually profitable for them."

Some new annual fees are truly eye-popping.

Chase, for example, has introduced three premium United Airlines cards with annual fees ranging from $130 to $375.

The most expensive card gets you access to the airline's Red Carpet Club lounge (membership normally costs $475) and double miles on all purchases. The $130 card gives you triple miles on United purchases, while the $275 offers Economy Plus seating for extra legroom and two lounge passes.

3. Splashy new programs for the select few

If you see a particularly generous credit card offer in coming months, chances are it will be directed to high chargers with top credit scores.

"The major card issuers will compete harder than ever to be the No. 1 card in the wallet for people with excellent credit and high monthly purchase volume," Woolsey said. "The programs may be less over the top in terms of some of the earning rates on certain spending categories than some seen in past years but may still be splashy from a marketing standpoint."

Of course, if you don't have pristine credit, you might not even see such offers. They will be mailed directly to carefully screened customers or marketed only to the affluent.

4. More nuisance fees

If you don't charge a lot, be careful. Issuers are experimenting with new fees for inactivity or for customers not spending above certain levels. Issuers "tolerated" low-charging accounts in the past because those accounts were subsidized by people who paid high fees and finance charges. No more.

"I anticipate issuers to find ways to make all accounts at least somewhat profitable," Woolsey said, "and fees may prove to be the only other lever they can pull for certain portfolio segments."

Another nuisance fee: If you mess up and pay late, expect to pay a "reinstatement fee," or you'll lose any points or miles you've accumulated.

"This is basically where an issuer holds your reward points hostage if you are late making a payment," Arnold said. "This new fee is on top of the up to $39 late fee that you would normally get dinged with."

Here are some pointers for navigating the new world of rewards programs:

• Don't seek out rewards programs if you carry a balance, as those cards almost always carry a higher-than-average interest rate. Instead, look for cards with the lowest possible continuing rates and work to pay off your balances.


• If you charge a lot and want continued access to the best rewards, make sure your scores stay high. Read "Raise your credit score to 740" for details.


• Set up automatic payments so you're never late. One late payment could trigger late fees and reinstatement fees.


• If an issuer imposes a fee you don't want to pay, call and protest. If the issuer won't waive the fee, don't be afraid to close an account if your credit scores are good and you have several other open accounts. For more, read "Held hostage by your credit scores?"


• Keep track of your rewards and their value when you cash them in. You want your rewards to be worth at least 1% of what you spend on each card, or you might want to start looking for better offers. Also make sure your rewards more than offset any annual fee.


• Redeem your rewards as soon as possible after you accumulate them, lest they lose value.


• Read all the fine print your issuer sends you on your existing accounts so you're alerted to any changes. If you're not sure of the implications for your rewards program, the forum at CardRatings.com or WebFlyer might provide some guidance.

Related Links:

How loyalty programs work, and why we prefer rewards points

12 great rewards cards for travel, cash back, gas, and shopping

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