Holiday Tips 2 – the best ways of earning miles with your credit card abroad

In Part 1 of Holiday Tips on Wednesday, I looked at ways to earn points when booking airport car parking.  Today I want to provide an updated look at the best ways to earn points when using your credit card abroad.

Something I stress on Head for Points whenever I can is the need to keep a clear mind when earning miles or points. If you are buying a product or service primarily because it offers you miles, you should have a view of how much those miles are worth to you to avoid over-paying.

This is especially true when earning miles from credit cards. Credit card miles are not free miles because you always have the alternative of using a cashback card instead. The ASDA Money card gives you 0.5% of your spending back in cash. Does your non-Amex payment card match that?

Historically, it was almost always a bad idea to use a mileage card for overseas spend. This is because all other miles and points cards – and indeed almost all other UK credit and debit cards – charged a foreign exchange fee of 2.99% which is itemised on your statement.  You can clearly see how much money is going out on avoidable FX fees.

Curve is one option

Curve – you can visit their website here – is an intriguing option.  You can find out more about Curve in this article – they will pay you £5 to try it out you don’t have anything to lose.

Curve, which is branded as a Mastercard, is NOT a credit card.  Instead, it recharges purchases made in a foreign currency to any other Mastercard or Visa you own, in £.

Curve adds a 1% FX fee to each transaction.  This is a lot lower than the 3% fee added by almost all UK credit and debit cards.  More importantly, you will also earn miles or points on the Mastercard or Visa which Curve recharges.

As an example, assuming £1 = $1.30:

You make a purchase in the USA for $130

Curve translates this to £100 and adds a 1% fee

£101 is recharged to the Visa or Mastercard linked to your Curve card – you earn miles or points on this card as you would usually, assuming it is a loyalty card.  The points earned should cover much of the fee.

Curve also allows you make ATM withdrawals abroad for a flat £2 + 1% rather than a 2.99% fee.  One £200 cash withdrawal per month can be recharged to a credit card – earning miles – but further withdrawals must be recharged to a linked debit card.

Earning Avios AND avoiding all FX fees

If you’re happy to take out another credit card and incur a £24 annual fee, there is an attractive alternative.

In late 2013, Lloyds Bank broke the mould by introducing a credit card – the Lloyds Avios Rewards card – which gave you miles AND no foreign exchange fees.  It was the first UK credit card to do this.

No-one else has yet followed suit and, now that interchange rates are capped, I doubt anyone will.  After all, FX fees are one of the few ways that a card issuer can now make a profit from anyone who pays their bill promptly.

The Lloyds card has a £24 fee.  There is no sign-up bonus.

There are also a number of FREE credit cards in the UK which do not charge any fees on overseas purchases.  These include The Post Office Money Platinum Credit and Halifax Clarity.  Clarity also offers totally free overseas ATM transactions.  None of these cards offer any loyalty points, however.

How does the Lloyd Avios Rewards card compare?

The Lloyds Avios Rewards card comes with a £24 annual fee, which makes it worse than the Post Office and Halifax Clarity cards. There is also a 3% fee on cash withdrawals abroad.

You will, however, receive 1.25 Avios per £1 spent abroad on the Amex card and 0.25 Avios per £1 spent abroad on the Mastercard. The Post Office and Halifax Clarity cards have no rewards programme.

If you value an Avios at 1p, and assuming your foreign spend is 75% Amex (your hotel will take it) and 25% Mastercard, then the Lloyds Avios Rewards card is a better deal than the free Post Office or Halifax cards if you spend over £2,400 abroad each year.

(Why? Because your £24 annual fee will be offset by the 2,400+ Avios earned back)

Is it ever worth using another credit card abroad and swallowing the 3% fee?

You may not want to go to the trouble of applying for another credit card just for overseas transactions.  There are some miles and points cards which are a decent choice for using abroad if you don’t want to go to the trouble of applying for a ‘no FX fees’ card.

The American Express Preferred Rewards Gold card (click for review) gives you double points when you use it abroad. This means you get 2 Membership Rewards points per £1, which converts to 2 Avios per £1. This does not fully offset the 2.99% FX fee, but comes close.

The IHG Rewards Club Premium Mastercard card (click for review) gives you 4 IHG Rewards Club points per £1 spent abroad. These can be redeemed for free nights at Crowne Plaza, Holiday Inn, InterContinental etc hotels. I value these at roughly 0.5p per point, so 2p of value per £1.

Spending abroad also helps you to achieve spending targets.

The IHG Rewards Club Premium Mastercard mentioned above also gives you a free night voucher when you spend £10,000 per year.

The Virgin Atlantic cards offer upgrade vouchers when you hit specific spend thresholds.

And of course the BA Premium Plus Amex gives you a 2-4-1 voucher for Avios redemptions valid in any class when you spend £10,000 per year.

You may find it worthwhile paying the FX fee on your credit card in order to achieve some of your spending target. After all, for most of us our holiday is one of the main expenditures of the year.

Conclusion

If you will spend over £2,400 abroad and are happy to pay the £24 fee, the Lloyds Avios Rewards card is an excellent choice.

Alternatively, take a look at Curve (they will pay you £5 for trying it) or one of the ‘no annual fee but no loyalty points’ 0% credit cards listed above.

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Want to earn more points from credit cards? – April 2024 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers:

SPECIAL OFFER: Until 12th May 2024, the Capital on Tap Business Rewards Visa card is offering a bonus of 30,000 points, convertible into 30,000 Avios. You must have a Limited Company to apply. Click here to learn more and click here to apply.

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending.