Competition has become fierce among credit card providers and many are having to raise their stakes when it comes to perks for new customers.
Air miles are the latest area of growth for credit card companies. While they may not have the best annual percentage rates (APRs), these cards will act as an extension to a frequent flyer programme by giving you extra air miles for every £1 spent on the card. This could be a great way to save up for holidays, particularly as these credit cards can be used for everyday items. Air miles can then be spent on flights and hotels, but you will pay any airline taxes.
JOINING A CLUB
There are several air miles schemes but the most popular is Avios, which covers six airlines including British Airways, flybe and Iberia. Other airlines have their own dedicated schemes, such as Emirates’s Skywards and Virgin Atlantic’s Flying Club.
You will earn points for flights booked on the airlines, as well as through spending on your dedicated credit card, but you can then only spend the accumulated miles on the carriers specified.
The benefit of joining bigger clubs like Avios is that points can be collected through other schemes, including the Tesco Clubcard, and at partner retailers. For example, Avios members can collect points when buying petrol at Shell filling stations and at online retailers such as Asos. Since the purpose of an air miles credit card is to collect points while doing everyday spending, joining a bigger scheme can therefore have significant advantages.
FEE OR NO FEE?
Air mile credit cards often come with an annual fee. Deciding whether to pay a fee comes down to how fast you hope to rack up air miles and how much you are willing to pay for faster accumulation. Generally speaking, cards with higher fees come with better rewards.
The other aspect to consider is that the most generous air miles cards are American Express. This is not always accepted in the UK but, if you travel frequently or use a credit card for business expenses, you will likely have more opportunities to use it. MasterCard tends to offer fewer points per pound spent.
One card with a reasonable charge which is also generous with points is the Lloyds Bank Avios Rewards card.
A dual American Express and MasterCard, it costs £24 annually but will give 1.25 Avios for every £1 spent on the American Express. This is a high return of points per spend, but since American Express is not accepted everywhere, it is likely some spending will have to be done on the MasterCard, which only gives 1.25 Avios per £5.
For big spenders, this could be a good choice. If you spend £7,000 in a year, you will receive a voucher for a free flight upgrade. The APR comes in at 18.94 per cent for purchases.
A similar option is the TSB Premier Avios credit card. It has the same points per spend structure, but gives double Avios on spending abroad. The charge is higher at £50 annually, but for big spenders the rewards are greater. A free “companion ticket” or second free flight for a partner can be earned with a spend of £15,000 a year.
For those looking for a free-fee option, there is the British Airways American Express card. It offers 1 Avois per £1 spent and requires a minimum household income of £20,000. The threshold spend for a free companion ticket is higher with this card, at £20,000. Again, American Express is not accepted everywhere so this needs to be taken into consideration.
Finally, the TSB Avios is a fee-free dual MasterCard/American Express credit card. It has no annual fee and is offering 0 per cent interest on balance transfers for up to six months, after a 3 per cent fee.