Maximise your Avios, air miles and hotel points

Should you use a mileage or a ‘no FX fees’ credit card abroad?

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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. There are numerous cash-back cards on the market (eg the Aspire card) so earning miles on a mileage card means you aren’t earning cashback.

As it turns out, cashback rates are relatively modest – Aspire pays back £145 if you spend £15,000 on it – so it is not hard to get better value from a good mileage card.

UK Rewards credit and charge cards

For foreign travel, it is a different game. It is almost always a bad idea to use a mileage card for overseas spend.

This is because all miles and points cards – and indeed almost all other UK credit and debit cards – charge a foreign exchange fee of 2.75% to 2.99%. Most card issuers hide this fee so you don’t realise you are paying it, because they simply adjust their exchange rate by 2.75%-2.99% rather than breaking the fee out.

There are a number of credit cards, however, which do NOT charge any foreign loading fees. Your transactions are converted at the wholesale exchange rates set by Mastercard or Visa, which to all intents and purposes are the ‘spot’ rates.

moneysavingexpert.com has a done a lot of work in this area, so the best thing to do is to read this article on their site.

The best offerings are from the Halifax and Santander, who have cards with no annual fee, no FX fees on purchases and no FX fees on cash withdrawals. The Post Office and Saga also offer cards with no annual fee and no FX fees on purchases, but they do charge a fee for using your card in an ATM. Nationwide also offers a good card, but only for its FlexAccount holders.

The new card from Sainsbury’s Bank comes with a £60 annual fee but does give you free travel insurance for your family. You also earn Nectar points on your foreign spend, albeit at a reduced rate which earns you just 0.1p per £1 spent!

If you live in London, Metro Bank is another option. They have a free current account which comes with a ‘no FX charges’ debit card. This is a good option if you don’t want to increase the number of credit cards you hold.

Should you get a ‘no FX fees’ card?

On the face of it, yes. Let’s say you value an Avios point at 1p. If you spend the foreign currency equivalent of £10,000 on the BA Premium Plus Amex, you will earn 15,000 Avios but pay £299 in FX charges. That means you are effectively paying 2p per Avios – far more than they are worth, and more than you could buy them for via ba.com!

Some cards give you bonus miles for foreign spend to encourage you to use it abroad. The Lloyds TSB Premier Duo Amex, for example, gives you double Avios – 2.5 Avios per £1. This is not bad, but you are still ‘paying’ more than 1p per Avios you accumulate.  The Amex Preferred Rewards Gold and Priority Club Black Visa also offer double rewards, worth roughly 2p per £1, on foreign spend.

However, I am a hypocrite ….

Despite the clear arguments in favour of FX-free cards, I don’t have one. I justify it to myself like this:

  • My wife and I both have British Airways Amex cards which each require £10,000 of annual spend to trigger the 2-4-1 voucher. Without putting our holiday spend through a BA Amex, we would struggle to earn both vouchers.
  • I have a ‘grandfathered’ BMI Mastercard which earns 2 Avios per £1. For the modest non-Amex spend abroad I do, 2 Avios per £1 is acceptable.
  • Our holidays are generally expensive. I have a high credit limit on my BA Amex and I am not convinced that any of the ‘no FX fee’ cards would come with a limit high enough to make it usable.
  • I am concerned that getting another credit card with, say, a £10,000 limit would restrict the number of cards I could open in the future, all of which earn me generous sign-up bonuses. (Although if I got the Metro Bank debit card this would not be an issue.)

Do as I say, not as I do ….

… is my lesson in this post! Unless any of the four bullet points above apply to you, you should take a serious look at ditching your mileage card for your next holiday and getting a ‘fee-free’ card instead.

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

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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:

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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.

British Airways American Express Premium Plus

25,000 Avios and the famous annual 2-4-1 voucher Read our full review

American Express Preferred Rewards Gold

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The Platinum Card from American Express

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Virgin Atlantic Reward+ Mastercard

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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.

British Airways Accelerating Business American Express

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American Express Business Platinum

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American Express Business Gold

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Capital on Tap Business Rewards Visa

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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.

Barclaycard Select Cashback Business Credit Card

1% cashback uncapped* on all your business spending (T&C apply) Read our full review

Category

British Airways American Express

Comments (14)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Raffles says:
    27 Sep27 September 09:26

    Aqua works OK if you prepay your hotel, especially if you can prepay it in Sterling, or use points for accommodation, or only stay away for a couple of days.

  • TigerTanaka says:
    27 Sep27 September 09:40

    Good article Raffles! I have a similar dilemma as going on a boys trip next week to Munich. I have the Post Office Mastercard but also need to hit the £2k in 3 months to trigger the 20,000 points on my Amex Gold.

    Can anyone clarify the following: As Amex Gold pays double points per £1 on both Travel and overseas spend, I don’t suppose I will get 3 or 4 points per £1 for paying my Munich hotel bill on my Amex?

    It is interesting to note that Amex seems to give about 0.5% worse exchange rates than Visa or Mastercard. I have not done a lot of work on this but I have checked a few random dates.

    • Britbronco22 says:
      27 Sep27 September 11:16

      Its unlikely that you will get triple points on your hotel in Munich, just the double. There are some things that will get triple points, but in my experience from the card Hotels are not one of them.

  • Roger says:
    27 Sep27 September 10:31

    I agree with the points you make. These days, I use miles/points cards when paying in sterling and avoid them for foreign expenditure, preferring to use the no FX cards. The only exception is paying for travel with my AmEx plat or BA AmEx PP to ensure travel insurance cover.

    As you have reported, US AmEx Centurion and Plat cards enjoy 0% FX fee AND award Membership Rewards. Were AmEx to offer this in the UK, I’d jump immediately.

    It’s probably a competitive reaction to Chase no FX cards and limited to the US and sadly I don’t see it coming to the UK very soon. I’d love to be proved wrong, though!

    • Raffles says:
      27 Sep27 September 11:27

      Good point re Amex Plat insurance cover, which now requires you to pay for certain items with your Plat card to get full cover. With hotels, the key appears to be to let them preauthorise the Amex Plat at check-in and then, if you’ve not been robbed or fallen ill in the hotel, use a different FX-free card at check-out.

  • mex73 says:
    27 Sep27 September 11:10

    With the Gold Amex card, double foreign spend and double travel spend means that for a hotel etc abroad you will get 3 points per £1. This is effectively 3 Avios per £1 spent — which means you break even — and if you wait for a conversion promo, it may be even more.

    • Britbronco22 says:
      27 Sep27 September 11:17

      What hotels have you experience this with? I only tend to receive the outbound spend on foreign hotels. And you are not meant to receive 3 points, so no chance of complaining about it to Amex.

      • mex73 says:
        27 Sep27 September 11:31

        You get the usual 1 point per £1 spent + 1 point for outbound spend + 1 point for travel spend, which gives a total of 3 points per £1 spent. This is what you’re entitled to get for foreign hotels, train tickets, flights etc. per T&Cs, so yes, you can complain to Amex if you don’t get it (I never had to).

        • Britbronco22 says:
          27 Sep27 September 12:33

          Could you be so kind as to highlight where it states this in the T&C’s? I can only find references to 2 points per £1.

        • mex73 says:
          27 Sep27 September 14:27

          The T&Cs say “1 point for every full £1 spent and charged per transaction, 2 points for every full £1 spent and charged per transaction at major airlines, car hire, rail, cruise, lodging and travel package/agencies, and 2 points for certain transactions made in a currency other than UK Sterling with the exception of internet transactions.”

          I agree this is not very specific — “major” airlines, “certain” transactions” etc., but it does work for most of my transactions, e.g. for a £120 BA ticket not originating in the UK I got 120 base points, 120 point bonus points for outbound spend and 120 point bonus for travel spend:

          BA.COM £120.39 120
          Outbound spend bonus – 0 120
          Travel bonus – 0 120
          360

  • Britbronco22 says:
    27 Sep27 September 11:27

    Raffles, I agree that if the spend triggers a 2-4-1 it is acceptable. However I don’t fully agree with your other 3 exceptions.

    Using the BMI Mastercard means you are paying 1.5p per Mile, which is twice what you value them at. It seems the ‘0.75p overpay’ hasn’t been enough to stop the inertia of using the BMI Mastercard.

    For your 3rd point, I would expect you to get at least a £10k credit limit on a fx fee
    free card. I would have thought that is ample if you are putting through a lot on the Amex for the 2-4-1 as well?

    Your last point seems in opposition to your 3rd points. You are worried the limit wouldn’t be high enough, but then you say you don’t want a high limit because it might restrict your ability to apply for other cards. Anyhow, I think you are worrying too much about this, the combined credit limits of my cards is around £65k I think, plus Amex Charge Cards. This is above my annual salary. I doubt an extra £10k card limit is going to trouble your applications. Has your wife cancelled that Natwest card yet?

    I suspect the main reason you haven’t got a fee free card is they are rather boring, they make economic sense over time. Unlike the exciting cards with big bonuses!

    • Raffles says:
      27 Sep27 September 11:49

      You are probably right about the last part! The need to spend £20k to trigger 2 x 2-4-1’s was the key driver for not getting an FX free card. I think there was also intertia on my part, because Amex does not break out the fee and so you don’t see it. There is often something else going on as well, eg at Sandy Lane in May I was using the Lloyds Avios card as I was still getting 25 Avios per £1 on foreign spend! I also like to keep a relatively slim wallet. I am now leaning towards Metro Bank, though. You can never assume you will get a high credit limit – we all know how stingy Lloyds were with the Avios cards, and my wife (on a six-figure salary) was given £1,000 when she got a House of Fraser Mastercard, issued by Santander!

  • Raffles says:
    8 Oct8 October 14:25

    I would value PC at 2% back (0.5p per point), Lloyds at 2% back (c 0.75p per Avios), Amex Gold at 2% (1p per MR point if used well), so all about the same. If you have no particular need for more Avios or PC points, then the Membership Rewards points will always give you more flexibility as to where you use them. If you were targetted for a transfer bonus at some point, you would also end up nearer 3% back. There is also the outside chance that overseas hotel spend on the Amex Gold will give you 3x points (1 bonus for foreign spend, 1 bonus for travel spend).

  • louie-m says:
    8 Oct8 October 15:18

    Thanks 🙂

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