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This is not even remotely true.
Its been a long time since I used the game through Steam, but paying for your subscription through your Steam Wallet should only be one of the options. (Though, I believe its the only option that goes through Steam.)
You should still be able to pay for you sub by credit card though. As I said, its been awhile, but I'm almost certain that I was paying for mine that way before moving to the standalone launcher found on LOTRO.com.
The Steam game subscriptions are something totally different where I have games that each period (ex: each month) I pay a subscription/membership (ex: Fallout 76, Elder Scrolls Online, Secret Legends, ...). These games never asked me to pay through my Steam Wallet.
I don't undertand why LOTRO wants me to use my Steam Wallet instead of being a regular Steam game subscription.
I will check it again in case I miss something.
To bypass Steam and pay alternatively,
Open your Steam Library,
Right click the Game,
click "Browse Files"
scroll down and find : LotroLauncher
Now you can Copy and paste anywhere, or you can simply right click and send it to Start Menu.
Now you can use this to Start the game without login in through Steam.. and you can pay with a CC.
In warframe you can use your steam wallet to buy platinum too. So I think it is the same, you can use your wallet to pay for stuff avaliable on the game store.