What would a new British Airways credit card look like in the 0.3% interchange fee world?

Last weekend I discussed the closure to new applicants of the IHG Rewards Club Visa credit cards, issued by Barclaycard.

I used the article to examine strategies that credit card companies may now use to make their products attractive, given that it is now virtually impossible to make any money off your purchases (0.3% merchant fees don’t get you far) and that loyalty credit card holders rarely pay interest.

In the new credit card environment, this is what I think you need:

an annual fee, unfortunately

some benefits provided by the travel company, partly funded by the annual fee and partly funded by their desire to keep their logo in your wallet

an incentive to put a significant amount of expenditure through the card

a relatively modest earning rate day to day

I began to think what a new super premium British Airways American Express card would look like.

(Would it even be an American Express card?  With Amex interchange fees now capped at 0.3% on their co-branded cards, BA gets all of the downside of limited Amex acceptance with none of the upside that comes from fatter fees.  Unfortunately, a new IAG-wide Amex deal has only recently been agreed.)

The British Airways Premium Plus card is probably the most successful travel card in the UK.  This is not just because of the BA link – it is because of the 2-4-1 voucher that comes with it.  No other airline has had the nerve to match it.  Some, slightly pathetically, have pretended to introduce equivalent 2-4-1 vouchers (looking at you, Virgin and Emirates) but these are virtually impossible to redeem for practical or financial reasons.

So, where would we go with a new card?

Let’s call it the British Airways Even More Premium American Express.  And let’s make it grey:

rsz_pic_premium_card (2)

These are my initial thoughts.  My card would, by definition, be very exclusive because – frankly – the market doesn’t want modest spenders now.  Put £500 per month on your credit card and it only generates £1.50 of interchange fee.  That hardly covers the cost of posting your statement and handling your payment, let alone the cost of lending you money interest free for up to 56 days and paying for some miles.

I want a simple but compelling package for my new card.  How about:

an annual fee of £300

1.5 Avios per £1 (with the free BA card cut to 0.5 Avios per £1 and the Premium Plus cut to 1 Avios per £1)

a 2-4-1 voucher at £10,000 of spend, as now

British Airways Executive Club Bronze status for free as long as you hold the card

British Airways Executive Club Silver status if you spend £20,000 within a card year

British Airways Premium Plus

There are obvious snags with my card, of course:

It has no attraction at all to current Silver or Gold card holders – we would need to know what % of current BAPP cardholders were Silver or Gold first.  If it was 20% or less, which it probably is, it would still leave a large potential market for this product.

How would it fit with your British Airways membership year?  If you hit Silver in the first month of your membership year you get 26 months of status.  Hit it in the last month and you only get 16 months.  There would be a skill in lining up your Amex card year and membership year to best advantage.  On the other hand, if you were confident that you could hit £20,000 of spend every year then it wouldn’t matter as you would retain permanent Silver status regardless.

BA would lose revenue from passengers who no longer need to chase tier points – but would gain some from people who move travel to BA because they would now have lounge access.  In particular, it may win back customers who walked away after the tier point changes last year made it virtually impossible to gain Silver with just short haul flights.

I’d love to add 0% foreign exchange fees to my card benefits but that is hugely unlikely.  It is the only way apart from the fee that the issuer would make any money from me.

There is nothing clever or complex about my card.  That was done on purpose.  The easier it is to understand, the more it will appeal.

I would get such a card if it existed.  Spending the £20,000 would be possible and my vanity would encourage me to pay £300 to get a permanent British Airways Silver card.  This is despite the fact that I rarely fly Economy anyway – but the benefit of free seat selection would mean it pays for itself.

If you have any ideas for your own new BA card – remembering that the benefits need to be funded from a paltry interchange fee and the annual fee – please share them below.

(Want to earn more miles and points from credit cards?  Click here to visit our dedicated airline and hotel travel credit cards page or use the ‘Credit Cards Update’ link in the menu bar at the top of the page.)

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Comments

  1. I saw someone in a bar with a platinum coloured BA Amex card. Any ideas how they got it?

  2. Raffles, some suggested tweaks to your proposed benefits:

    – 300 status credits with the card and another 300 if you spend £20K a year
    or
    – Make the annual fee much less, and give, 300 status credits when you spend 10K, 300 when you spend £20K, maybe even another 300 when you spend 30K. That way the card could be used by those who already have stats to top up status to the next tier.
    and
    – A 2for1 voucher which does not have to be used by the cardholder providing a member of their BA Friends and Family is travelling, and is valid for 3 years, issued every time £10K is spent on the card.

    • Good idea. Giving tier points means that existing Gold members would also be interested and you still still the same end result that I highlighted. You’d also need to take the 4 qualifying flights which would keep BA happy.

      Not sure they would go with 3 years on the voucher, purely because having one ‘in the bank’ reduces your incentive to work towards one the following year.

      • Patrick says:

        Or to encourage people to work towards more 241 vouchers they could alter the terms and allow they to be redeemed on the same booking. For example Bob buys a reward flight (with w x 241 and takes his two best mates Jeff and Raffles on holiday for free (+ ridiculous amounts of taxes).
        It could work?

  3. The_Real_A says:

    Since the cap does not apply to commercial/business cards. I can see a large increase in the amount of “self employed” amoungst the readers for HfP.

  4. I also have the Corporate BA card which earns a lot of Avios. Is that one to be restricted in the same way? No 2-4-1, but the quantity reduces the need…

  5. Rather than trying to make the restrictive rules work with a new card or existing cards, wouldn’t it be more realistic for BA be scrap them and try and offer more benefits through the gold/platinum cards instead? e.g. status, conversion bonuses etc.

  6. rams1981 says:

    O/T Tesco pet points posted and Dodo’s policy has been cancelled. Great work again Rob

  7. Just coming up to end of first year on gold and want to switch to BA PP. If things change in near future, are current benefits secure for the first year? I was also going to wait to a higher sign up bonus offer, but presuming this won’t happen now. Do people agree?

    • the 25000 bonus (26 if referred by raffles), instead of 18000, will eventually come back ….patience is the game here if you can wait..

      • Genghis says:

        Yes but the 25/26k bonus only ended in Feb and lasted months.
        Laura – if you don’t have a decent points earning credit card, if I were you I’d go for the BAPP now to capture all that spend…

      • It ran almost every few months last year like clockwork. My worry is that with the interchange fee cut, they will not bring it back. Then if I wait too long, benefits on the card will be cut. Are current benefits locked in for a year once you apply?

        • If you’ve paid a fee for the card, they can’t cut your benefits without giving you the option of having your annual fee refunded – so it is 99% certain that changes would only kick in at renewal. Amex may well be tied into a contract with BA that can’t be changed – that is why we haven’t seen many co-brand cards change their benefits yet.

    • There is also a generous upgrade from Gold to Platinum offer. Worth it if you can hit the target within a month & then cancel…
      https://www.americanexpress.com/uk/content/upgrade-to-platinum/

  8. I was actually wondering if the cap on fees will help with Amex being more widely accepted, which would mean it’s not to bad for BA to remain with them.
    The high fees were the main reason for merchants not to accept it…

  9. For me current 150 GBP fee is what I approximately value 2-1 voucher
    So the only advantage to keep BA card is 1.5 miles per GBP
    if that is removed or reduced – or fee raises , I would better cancel it and either use Amex platinum or gold , to have status is nice – but Priority Pass is better ,
    I think AMEX earn a lot on FX conversion commissions , as while there are 0 fee FX cards , for me the amount of FX fee not justify to apply to another card – so I still use AMEX abroad

  10. I think what valuable benefit could be added to offset fee increase – is addition of “upgrade voucher” – i.e. similar to what lloyds was doing

  11. Bit O/T

    I am looking to upgrade my standard BA card to the BAPP, in order to generate the 2-4-1 (and earn more Avios day-to-day). I understand that if I do this after spending £10k (probably a month or so away), my 2-4-1 will be automatically generated.

    I just wanted to know if the 2 years to use it will then start from the day of the upgrade, or backdated to when the £10k was hit?

  12. If this card went ahead, it would pretty much put their Amex Plat card out of business!

  13. the Barclaycard IHG visas are back on the barclaycard website! great news, but how strange!

    cheers

  14. Definitely would be interested in something like this. Status or better still tier points towards status would make a higher fee worth it to me… 300 for a £10K spend would be enough to entice me into flying enough with BA and partners to get another 300 for worthwhile benefit from Silver. As mainly a leisure traveller that’s achievable whereas 600 is a struggle.

  15. I don’t see Amex Platinum being diluted with BA branding so either it ends now or their is a revamp with a free card at the bottom and perhaps a more expensive one priced accordingly.

    They are not going to overly complicate matters with X status or tier points but Silver would be a good idea perhaps. Changing their metal would impress me more though.

    The real worry is how to replace income. If I spend £50,000 on Amex at 1.5% commission for them then I generate £750. If that is reduced to 0.3% then it becomes £150 and as stated, that is fairly near the cost of funding and management expenses. Charging me another £200 on a card is not going to cover any of that lost income if extra benefits are being offered.

    Another thought is a more exclusive card, around £750/1000 but I doubt there is a desire to usurp Amex platinum either.