iahphx, I will open a dispute with the CC.
cfischer, You said: 1 night cancellation fee plus 1 night stay would still be cheaper than paying for 1 night outright. My intention was to check in for one-night and then do an early checkout. In such an event, I would pay a higher one-night rate, but without incurring the cancellation charge.
sannmann Why do you believe the hotel is correct? The third clause implies one has the option for early checkout without cancellation penalty, even though a higher rate may apply.