Part 2: Why ‘no foreign exchange fees’ on the new Lloyds Avios Rewards cards is a game-changer

I am dedicating all three posts today to the new Lloyds Avios Rewards cards.  Post 1 is an overview, and Post 3 looks at the upgrade voucher.  This post looks at the FX fees benefit.

For me, the most surprising part of this announcement was the fact that there will be no 3% foreign exchange fee added to transactions you make with either of the two Lloyds Avios Rewards cards.

To put this in perspective, never before has a UK rewards card – of any sort – also offered ‘fee free’ foreign exchange transactions.

Lloyds Avios Rewards 2

In general, before today, it was 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 – charged 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 were a number of credit cards, however, which did NOT charge any foreign loading fees.  None of these offered rewards.

With ‘fee free cards’, your transactions are converted at the wholesale exchange rates set by MasterCard or Visa, which to all intents and purposes are the ‘spot’ rates.   Before the Lloyds card launched, the best offerings were from the Halifax, Saga, the Post Office and Capital One, who have cards with no annual fee and no FX fees on purchases.  Nationwide also offers a good card, but only for its FlexAccount holders.  If you live in London, Metro Bank was another option with a ‘no FX charges’ debit card.

Some mileage cards offered a bonus for foreign spending, but still charged the 3% fee.

The American Express Preferred Rewards Gold card 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.

The IHG Rewards Club Black Visa card gives you 4 Priority Club points per £1 spent abroad, double the normal rate.

In both of these cases, the ‘bonus’ for foreign spend brought your total reward up to about 2p of value per £1 spent, but this was outweighed by the 2.99p per £1 FX fee.

(Of course, spending abroad also helps you to achieve spending targets.  The IHG Rewards Club card mentioned above also gives you a free night voucher when you spend £10,000 per year.  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.  It was often 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.)

The new Lloyds Avios Rewards card lets you have the best of both worlds

Your best option, before yesterday, was either:

Use an Amex Gold or IHG Rewards Club Black card, earn the equivalent of 2% back in benefits but pay the 2.99% fee


Use a Halifax, Saga, Post Office etc ‘no fees’ card but get no rewards

The new Lloyds Avios Rewards card lets you earn 1.25 Avios per £1 on the Amex card AND saves you the 2.99% foreign exchange fee.  If you spend more than £800 abroad on your credit card each year, the saving on foreign exchange fees (at 3%) would outweigh the £24 annual fee for the card.

For this reason, I recommend getting a £24 Lloyds Avios Rewards card even if you only use it for overseas spend.  Whether you should bother to put additional spend on the card depends on whether you value the other benefits …. which is what Part 1 and Part 3 of my series of posts today discusses.

(To see our complete list of all current credit card bonuses, click here to visit our ‘Credit Cards Update’ page or use the link in the menu bar at the top of the page.)

Part 1: The two new Lloyds Avios Rewards cards - my review
Part 3: Is the 'upgrade voucher' with the new Lloyds Avios Rewards card of any value?
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  1. yep…I love my aquacard… a £3333 spend overseas is usually do-able for my £100 rebate, but long gone.. I would be tempted for the spend £7k get an upgrade but I just can’t face the Lloyds idiots again.. Raffles got stung by these guys and their games to avoid the 15k sign up deal.

    • Andrew (@andrewseftel) says:

      If you love your aqua card, check out the new Luma cash back card. 4% on supermarkets and petrol. Similarly targeted at a subprime audience, but great rewards if you pay it off.

    • To be fair, I had a lot of trouble with them but I got all the Avios I was due, unlike a lot of other HFP readers. I have more on this story coming up in a few days, as there is ‘news’.

  2. sandgrounder says:

    For completeness, N&P and Cumberland BS offer no-load debit cards as well, but the N&P require some monthly activity and the Cumberland have a geographical restriction.

  3. I’m sorry but the customer service at lloyds was truly truly awful, I don’t think I’d ever go back :s

  4. dannyrado says:

    I can see why people are getting so excited by this card but please remember people, this is lloyds, many of you/us will not get the sign up bonus, and is not simply a case of phoning them up to get it sorted. You will lose the well to live if you have to deal with these arseholes for anything at all.

    That said, the thing that is still unclear for me is overseas cash withdrawals. Firstly are they fee free, and secondly do they count towards targets? My halifax clarity charged me a grand total of 39p for a recent £200 cash withdrawal in aed.

    • No, and no. Don’t plan on getting the double avios for 6m without hassle (so it’s a nice surprise if you do), but the voucher should be fine.

    • There is no sign-up bonus, that’s why I am relatively keen on it!

    • Elliott says:

      According to the Lloyds website there is “a cash fee of 3% of the amount of each Cash Withdrawal you make in the UK or abroad (minimum £3)” – so these cards aren’t directly comparable to say the Halifax one, for those of us that like to get our foreign cash out fee-free at ATMs!

  5. OK, you found one!

  6. Dominic says:

    Just one thought/query… if there is no 3% or whatever on FX transactions…. are we sure that the equivalent profit for Lloyds will not just be in an inflated exchange rate? After all, that’s how the ‘no commission’ currency booths make their money….

    • James67 says:

      Not sure about the amex but the mastercard rate almost certainly be set by mastercard. My info may be wrong but I was once told mastercard and visa rates were about 1% less than interbank rates. Even if this is true still better than the typical fee loaded cards. One other thing to be aware off though is that many m erchants overseas will add 3% to the price if you want to pay by credit or debit card, particularly small merchants and/or in developing countries. In such cases it is then cheaper to withdraw cash with an N&P debit and pay cash unless you value the avios greater than the 3% supplement added by the merchant

    • Frenske says:

      Additionally unfortunately AmEx is not widely accepted. Heck I couldn’t use my UK-Visa in many restaurants in Germany, so you might end up using the MasterCard a lot more abroad than the AmEx.

    • No, they take the MasterCard rate. They still make their commission from the merchant, remember, so they are still making money on the transaction.

  7. Andrew (@andrewseftel) says:

    Capital One do sometimes do credit limit increases on request. Worth the cost of a call/letter.

  8. Raffles – any reason why you’ve tipped the basic card over the premium one for this particular aspect? With only £5,000 spending for upgrade voucher, 1.5 avois per £1 spent and a 2-4-1 voucher at £12,000 it looks a good all-round deal.

    • My argument was this.

      The main benefit (as I see it) is the ‘no FX fees’, so paying £24 rather than £140 to access that benefit makes sense.

      My personal opinion is that I’d rather put £10,000 on a BAPP Amex and get a 2-4-1 valid for 2 YEARS and usable in premium cabins, versus putting £12,000 through a Lloyds Premier and getting an upgrade voucher (for 2 legs only) and a 2-4-1 only valid for 1 YEAR and only valid in economy.

      You shouldn’t be using Avios for long-haul economy redemptions, except at peak periods. So, at best, you might use your 2-4-1 to go to, say, Spain in economy. That saves you 20,000 Avios, which is a bit ‘meh’ given you’ve paid £140 for the card and put £12,000 through it.

      • Economy one-ways not from the UK are also a good deal with avios – recently booked trip around christmas – cheapest return was £1500, but found an outbound for £600 and inbound 30k avios + £100 (mixture of airlines) = 2.66p / avios

  9. I ‘only’ spend around £1000 non sterling each year so is it worth the £24 fee for 1250 avios ?

    Metro bank debit card is available if you live outside of london. You just call in to a branch and open an account – then you can use online banking.

    • i’ve got the mbna mastercard as well for spend over £10k on the ba pp amex. so i doubt i will bother with this card

    • Technically you’d make a marginal saving, but probably not worth the hassle of opening another card, especially one with no intro bonus.

  10. Andrew (@andrewseftel) says:

    Doing some calculations, I think the basic Lloyds card outperforms Cap One Classic Extra at >£4k forex spend per year.

    – Assumes 1p/Avios
    – Ignores intro bonuses, but these could be quite significant
    – At £4k you’re also close to unlocking the upgrade voucher
    – Amex vs MasterCard acceptance is also worth thinking about. C1CE clearly wins for non-Amex spend

    Let’s see whether this table of rewards comes out okay. Don’t forget that there’s also a 3% of spend FX ‘saving’.

    Spend Classic Extra Lloyds
    0 10 -24
    1000 15 -11.5
    2000 20 1
    3000 25 13.5
    4000 30 26
    5000 35 38.5
    6000 40 51
    7000 45 63.5
    8000 50 76
    9000 55 88.5
    10000 60 101

    • I would have thought more H4P readers would have bank accounts elsewhere – even before I got the Nationwide Select and C1CE, I rarely paid any 3% forex fees as I have bank accounts in most major currencies… I think the only time I’ve ever paid a bad rate was at an ATM in Norway but considering what the rate is now, that rate was excellent.

  11. I wonder how American Express will react to this. Pretty poor when an Amex networked card issued by a third party offers no forex fees but they don’t on their own cards.

  12. I’ve been using my Santander Zero Credit card for a number of years now. Believe it was pulled from the market last year – but current holders could keep it

    Best travel tool – also free cash withdrawals. I normally just log in to my santander current account and transfer amounts to my credit card to reduce any interest payable.

    The rates given are superb.

    Would consider this card to get some bonus avios on top

    • I have Santander zero current account and tend to use that abroad. Wonder if there is any benefit to this card for me?

      Here’s what we use:
      1. Amex PR gold wherever Amex accepted- over 15K per year.
      2. Hhonors platinum visa if Amex not accepted- so far spent 4K in the last 5 months that I have had it.
      3. Santander zero current account debut card for overseas spending. We travel minimum twice a year and spend over £2K overseas. ( in the last week we were in USA and spent 2000 there alone).
      The Amex fee free ends next May, thinking of getting BAPP after that.

      Can I improve on this strategy? Any comments grately appreciated.

      • You could switch the Santander card for the new Lloyds £24 card.

        The Hilton card is OK, you could also consider churning the IHG Rewards Club Black Visa. £99 fee but the 40,000 points sign-up via my link (see Credit Cards Update tab) easily offsets this.