Maximise your Avios, air miles and hotel points

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

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I am dedicating all three articles 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.

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

or

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.


How to earn Avios points from UK credit cards

How to earn Avios from UK credit cards (August 2022)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous 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:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

25,000 Avios for signing up and an upgrade voucher for spending £10,000 Read our full review

Barclaycard Avios card

Barclaycard Avios Mastercard

5,000 Avios for signing up and an upgrade voucher for spending £20,000 Read our full review

There are two official British Airways American Express cards with attractive sign-up bonuses:

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

25,000 Avios and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review

British Airways BA Amex American Express card

British Airways American Express

5,000 Avios for signing up and an Economy 2-4-1 voucher for spending £12,000 Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points.

EDIT: Until 25th October 2022, there is an exceptionally generous sign-up bonus on The Platinum Card. You will receive 60,000 Membership Rewards points – double the usual amount – and £200 to spend at Amex Travel. You need to spend £6,000 within six months to earn the bonus.

American Express Amex Gold

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

60,000 points, £200 travel credit and an unbeatable set of travel benefits – for a fee Read our full review

Run your own business?

We recommend Capital On Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, along with a sign-up bonus worth 10,000 Avios.

Capital On Tap Business Rewards Visa

10,500 points bonus – the most generous Avios Visa for a limited company Read our full review

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 30,000 Avios sign-up bonus.

British Airways Accelerating Business American Express card

British Airways Accelerating Business American Express

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

There are also generous bonuses on the two American Express Business cards, with the points converting at 1:1 into Avios. These cards are open to sole traders as well as limited companies.

Amex Platinum Business American Express

American Express Business Platinum

40,000 points sign-up bonus and a long list of travel benefits Read our full review

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.

(Want to earn more Avios?  Click here to visit our home page for our latest articles on earning and spending your Avios points and click here to see how to earn more Avios this month from offers and promotions.)

Comments (35)

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

  • bill says:

    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.

    • bill says:

      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

    • Rob says:

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

  • 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

    • John says:

      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.

  • Luke says:

    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.

  • Nick says:

    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

    • Boi says:

      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.

      • Rob says:

        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.

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

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