(EDIT: This post was updated in December 2014 and is correct as of that date)
The majority of the credit card posts on Head for Points are focussed on exploiting sign-up bonuses. Get a card, spend the minimum required to trigger the bonus, cancel the card, move on. After a couple of years, you can re-apply for the first card you got and claim the bonus again – it is a virtuous circle!
However, if you are a high to medium spender then the few thousand pounds of card spend required each year to hit your sign-up bonus targets will not be a stretch. You then need to consider where to put the rest of your spend.
In an effort to cut down on card churn, many issuers are now offering bribes for spending £10,000+ per year on their cards. The value of these perks is often underestimated – they are often worth far more than the points for your normal spend.
In order of value, lets take a look at what is out there. This analysis ignores the value of any sign-up bonus or ‘first year free’ deal – I am looking for the best long-term all-spend solution.
The results summary is (based on spending just enough to trigger the relevant long-term bonus):
- BA Amex Premium Plus – 7.1% back on first £10,000
- BA Amex – 4.5% back on first £20,000
- Virgin Atlantic Black Amex & Visa – 3.1% back (if all Amex spend) on first £10,000
- Lloyds Avios Rewards Amex & Visa – 2.7% (if all Amex spend) on first £7,000
- IHG Rewards Club Premium Visa – 2.5% back on first £10,000
- Lloyds Avios Premier Rewards Amex & Visa – 2.4% (if all Amex spend) on first £12,000
- Hilton HHonors Visa – 2.25% back on first £10,000
- TSB Premier Amex & Visa – 1.6% back (if all Amex spend) on first £15,000
- House of Fraser MasterCard – 1.0% back in House of Fraser vouchers on all spend
Our base comparison – The House of Fraser MasterCard
This is the card against which I am comparing the others. If a loyalty card can’t beat the best (pseudo) cashback card, you should take the cashback and book your flights and hotels directly! Whilst the House of Fraser card does not pay you directly in cash, you receive 1% of your spend back in House of Fraser vouchers.
The winner - BA American Express Premium Plus card
This is not exactly a surprise. Spend £10,000 on this card and you get a voucher which gives you 2 Avios redemptions (on BA planes, ex-UK only) for the miles of one. On an average redemption (2 Club World tickets to San Francisco, say), this saves you 100,000 Avios points!
Based on my (very mean) 0.75p per Avios point valuation, the 2-4-1 is worth £750. You also earn 15,000 Avios for spending that £10k (worth £110) with an annual fee of £150. Net benefit for spending £10,000 = £710, or 7.1% of spend.
Runner-up – BA American Express card
The standard, free, British Airways Amex gives you a 2-4-1 voucher when you spend £20,000, and a lower 1 mile per £1 on your spending. Using the same maths as above, £20,000 of spend gets you £750 of 2-4-1 benefit plus 20,000 Avios for your £20,000 of spending, worth £150. There is no fee. The net benefit for spending £20,000 = £900 or 4.5% of spend.
However, it is important to note that I do not recommend that you get the free BA Amex if you intend to spend enough to trigger the 2-4-1 voucher. You should focus on the British Airways Premium Plus Amex instead, not only for the higher earning rate but because the 2-4-1 vouchers lasts for two years instead of one.
Honourable mention, hotel category – IHG Rewards Club Premium Visa card
The premium version of the IHG Rewards Club card gives you a voucher when you spend £10,000 for a free night in ANY IHG Rewards Club property. I am assuming you use this somewhere expensive, such as the InterContinental in London, Paris, Hong Kong, New York etc for a £250 room. (I used mine at the InterContinental New York Times Square this year.)
In addition, you would have earned 20,000 points from your £10k of spend which I value at £100. The card fee is £99. Net benefit for spending £10,000 = £250 or 2.5% of spend.
Honourable mention, hotel category – Hilton HHonors Platinum Visa
This one really depends on your hotel stay pattern. Spend £10,000 on the card and you are given Hilton Gold staus for a year. Hilton Gold gets you free breakfast, free internet and a guaranteed upgrade, but this is still achievable for free via occasional promotions. And, fundamentally, if you stay enough at Hilton properties to get real value from this then you probably stay enough to earn a Gold card.
Assuming that you and your partner spent 5 nights a year at a Hilton then the breakfast and internet benefits are worth £125+. Add in £100 of value from the 20,000 Hilton points earned from your £10,000 spend and the £0 card fee, and you’d have a net benefit of £225 or 2.25% of spend. This is VERY dependent on your Hilton stay pattern, though.
Honourable mention, airline category – Virgin Atlantic Black Amex and Visa cards
The Virgin Black card comes with two benefits which may or may not work for you. The one I do not value is the ‘free companion ticket’ voucher for spending £7,500. This voucher is ONLY valid when the other person buys a full fare flight for cash. It is therefore only beneficial to someone travelling on business on a fully flex ticket who wants to take their partner along. Very few people will have the flexibility or lifestyle to do this.
The other benefit does have value. For spending £5,000 you receive a voucher for an upgrade to Premium Economy when you book an Economy redemption flight. A 2nd voucher comes at £10,000, which you would need if not travelling alone.
On a route such as UK-Los Angeles, the miles saving (based on the cost of Premium Economy versus Economy) would be 22,500 miles per ticket. Assuming you can find availability (and Premium Economy is a small cabin), the value you get for £10,000 of spend is 45,000 miles which I value at £300.
You would also earn 20,000 Virgin miles for your £10,000 spend if it was on the Black Amex, worth £150. The card fee is £140, so the net gain is £310 or 3.1% of your spend.
Honourable mention, airline category – Lloyds Avios Premier Rewards Avios Amex and MasterCard
This is a tricky one to value. You earn 1.5 Avios per £1 on the Amex but only 0.3 Avios per £1 on the MasterCard, so your spending mix is key.
When you spend £12,000 across both cards, you receive a 2-4-1 voucher. However, unlike the BA Amex voucher, this 2-4-1 voucher is only valid on economy redemptions, and is NOT refundable if you cancel your flights after booking. It is also hard to value Avios when used for economy flights – they are almost worthless on long-haul flights due to the taxes, but Reward Saver flights can be an excellent deal. The voucher can also be used on Eurostar and some other Avios partner airlines, but again only in economy.
I will assume you achieve the spend entirely on the Amex, and use the miles for a flight to Marrakech. You would therefore save 20,000 Avios on the 2nd redemption, worth £150.
The Lloyds Avios Premier Rewards card also comes with an upgrade voucher when you spend £5,000. This allows one person to upgrade a return Avios reward flight by one class. I am assuming that the upgrade voucher is used to upgrade a World Traveller Plus ticket to New York to Club World, saving another 20,000 Avios.
You would earn 18,000 Avios, worth £135, for the £12k spend.
That means you will receive 40,000 bonus Avios (£300 value) plus 18,000 Avios for spending £12,000 on the American Express card, worth £135. Deduct the £140 annual fee and the benefits are worth £295 on £12,000 of spending, or 2.4%.
Honourable mention, airline category - Lloyds Avios Rewards Avios Amex and MasterCard
The ‘other’ Lloyds card does not come with a 2-4-1 voucher, but you will still receive the upgrade voucher. You earn 1.25 Avios per £1 on the Amex but only 0.25 Avios per £1 on the MasterCard, so your spending mix is key.
The basic Lloyds card requires a higher £7,000 spend to trigger the upgrade voucher. This allows one person to upgrade a return Avios reward flight by one class. I am assuming that the upgrade voucher is used to upgrade a World Traveller Plus ticket to New York to Club World, saving 20,000 Avios.
You would earn 8,750 Avios, worth £65, for the £7,000 spend.
That means you will receive 20,000 Avios of value from the upgrade (£150 value) plus £65 of Avios for spending £7,000 on the American Express card. Deduct the £24 annual fee and the benefits are worth £191 on £7,000 of spending, or 2.7%.
Of value only to heavy spenders on non-Amex cards – TSB Premier Avios Amex and MasterCard
This offers an identical 2-4-1 voucher to the Lloyds card above, but is triggered at £15,000 rather than £12,000. You earn 1.25 Avios per £1 on the Amex but only 0.25 Avios per £1 on the MasterCard.
I am assuming that the 2-4-1 voucher saves you 20,000 Avios (same calculation as per the Lloyds card). You would earn 18,750 Avios, worth £140, for the £15k spend on the Amex. Netting off the card fee, the net benefit for spending £15,000 is £240 or 1.6% of spend. This is not great.
(Note that there is a work around which allows you to use the TSB voucher to travel out in Economy and back in a higher class. If you book via the general avios.com interface, and not via the link in the voucher, you can book an ‘Economy out, other back’ ticket. At the end of the process, it will ask if you want to use your voucher. Say ‘yes’ and it will ticket OK.)
If all the spend went on the MasterCard, your return on £15,000 would be 3,750 Avios (worth £28) plus £150 for the voucher, so £178 of value less £50 fee. This is a very poor 0.86% of spend – you are better off with the House of Fraser MasterCard.
Other contenders disqualified at the group stage:
Starwood Amex – upgrade to SPG Gold status for spending £15,000 and free weekend night for spending £25,000. This is a poor deal considering that SPG Gold has only modest benefits and is often available for free, eg as an Amex Platinum benefit. The free weekend night is valid only at Category 1-4 hotels, which limits its use considerably, and is a poor reward for such massive expenditure.
Virgin Atlantic White Amex & MasterCard – free economy to PE upgrade for spending £10,000 and companion ticket for spending £15,000. The high spend level required is not worth the modest value of the rewards. The ‘Economy to Premium Economy’ upgrade voucher on a redemption IS good, but you’re better off getting the Black card which gives two upgrade vouchers for spending £10,000 (and one for spending £5,000).
American Express Preferred Rewards Gold – 7,500 Membership Rewards points when you spend £15,000, paid when you next renew. I would value the 7,500 points at £75, and you need to commit to paying your £125 renewal fee (admittedly pro-rata refundable on cancelling) for the next year to trigger it. Unless you value the Lounge Club vouchers that also come with renewal, this is not a fantastic deal.
Emirates Skywards Elite Amex & Visa – free companion ticket when you spend £10,000. However, you need to buy a full-fare ticket to receive your companion ticket, and even then there must be reward availability on the flight. This will be almost impossible for most people to use.
I am happy to hear arguments for and against my views here – many of these rewards are subjectively valued, dependant on your travel patterns. There is also, I know, a lot of info in this post so please do post below if you want anything clarifying – you are probably not alone!
(Disclaimer: Head for Points is a journalistic website. Nothing here should be construed as financial advice, and it is your own responsibility to ensure that any product is right for your circumstances. Recommendations are based primarily on the ability to earn miles and points and do not consider interest rates, service levels or any impact on your credit history.)