Letters started to land on doormats yesterday from MBNA explaining what rewards scheme would apply to ex-bmi Diamond Club credit cards now that the Avios scheme has closed.
Interestingly, MBNA has decided to make different offers to different people. It isn’t yet clear if they are doing this based on the card type you used to hold OR the amount of money MBNA made from you in the past. It seems to be the latter.
There are at least three different variants:
Some people are told they will get no rewards
Some people who held the MasterCard are being offered an eye-wateringly good 0.75% cashback on all future spend (details here) on what will now be a free card
Some people who held the Amex and Visa combination are being offered 1% back on the American Express and 0.5% back on the Visa (details here) on what will now be a free card
What did I get?
My Diamond Club will be converted to an MBNA credit card. This card will carry no rewards or cashback at all.
What is interesting about this decision is my ‘history’ with Diamond Club. I am responsible for probably the biggest single transaction ever made on a bmi Diamond Club credit card.
Despite this, I have paid a grand total of £0 interest on the cards over the last decade.
So, why have I been given a card with no rewards? Have I historically spent too much? Have I paid too little interest? I imagine I will never know.
For the rest of you – or at least those of you who did not also receive the ‘no rewards’ card – there is a substantial arbitrage available here if you are self-employed or have any other reason to pay tax to HMRC.
Let’s take VAT payments for sole traders. The credit card fee is 0.38%. Because it is a business expense, the net fee for most people is nearer to 0.25%. Giving you 0.75% cashback represents a decent profit.
Even on your personal tax payments, where you cannot write off the card fee as a business expense, you will make a margin of 0.37% which is worth having.
Anyone who receives the 0.75% cashback MasterCard deal should consider themselves lucky and should be thinking carefully about why they may want to use a rewards Visa or MasterCard instead.
I am not yet sure what I should do. I am tempted by the Lufthansa Miles & More card, purely as a way of getting Lufthansa First Class redemptions. I may not qualify for the sign-up bonus as I have had the card before, but I would get a 33% bonus on my spending for 6 months. That would make 1 mile per £1 on their Visa card.
I also qualify for the HSBC Premier World Elite MasterCard as I have the current account – I used to work for HSBC once and lifetime Premier came as a perk – which pays 1 Avios per £1. There is a £195 fee but the sign-up bonus offsets this in Year 1.
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. By recommending financial products on this site, I am – technically – acting as a credit broker. Robert Burgess, trading as Head for Points, is regulated and authorised by the Financial Conduct Authority to act as a credit broker.