Tesco Mastercard rate slashed – what is the best Avios Visa or Mastercard now?

Tesco Bank accounced yesterday that it is halving the earning rate on the Tesco Clubcard Mastercard from December.

Spending outside Tesco will only earn 1 Clubcard point (2.4 Avios points) for every £8 spent.  Spending in a Tesco store retains the current rate of 1 point (2.4 Avios points) for every £4 spent.

In reality, this is even worse than it seems.  Tesco pays you PER TRANSACTION, rounded down to the nearest £8.  A £7.99 purchase will earn NOTHING.  A £15.99 purchase will only earn 1 point.

Tesco is blaming this on the decision by the European Union to cap interchange fees on MasterCard and Visa cards at 0.3%.  This will lead to a substantial reduction in the income of credit card companies albeit, hopes the EU, with an equivalent reduction in retail prices.

I wrote about this issue in detail here so I will not repeat myself.  The decision means that card companies will be reliant on interest income and annual fees to make their money and, since few people with a reward card pay interest, it seems that higher annual fees may be the way forward.

What is the best Visa or Mastercard option now?

This article looks at the best free Visa and Mastercard options across ALL loyalty schemes.  In terms of Avios, you are looking at the following options:

1 Avios per £1 – HSBC Premier Mastercard based on 5 Avios points, Etihad Guest, Krisflyer or Asia Miles mile per £5 spent (note that this card is only available to HSBC Premier current account holders and has strict financial criteria for acceptance).  This is the best Avios option but most people will struggle to meet the account opening criteria.  Representative APR 11.9% variable.

0.4 Avios per £1 – IHG Rewards Club Premium Visa.  This card earns 2 IHG Rewards Club points per £1 which convert, in chunks of 10,000 points, to 2,000 Avios.  There is a £99 annual fee.  Representative APR 42.2% variable including fee based on a notional £1200 credit limit.

0.3 Avios per £1 – Tesco Clubcard Mastercard based on 0.125 Clubcard points per £1 from December 2015.   In reality you will earn less than this because Tesco rounds down each transaction to the nearest £8, offset slightly by the fact that transactions in Tesco stores will earn double points.  Representative APR 18.9% variable.

0.3 Avios per £1 – Lloyds Premier Avios Rewards Mastercard.  This card comes with a £140 annual fee and comes with an American Express card as well.  Representative APR 52.1% variable including fee based on a notional £1200 credit limit.

0.25 Avios per £1 – Lloyds Avios Rewards Mastercard.  This card has a £24 annual fee and comes with an American Express card as well.  Representative APR 23.7% variable including fee based on a notional £1200 credit limit.

0.25 Avios per £1 – TSB Premier Avios Mastercard.  This card has a £50 annual fee and comes with an American Express card as well.  Representative APR 21.9% variable including fee based on a £1200 credit limit.

0.2 Avios per £1 – Hilton HHonors Platinum Visa.  This card is free.  You earn 2 Hilton HHonors points per £1 spent which convert at 10:1 into Avios points.  The minimum transfer is 10,000 Hilton points.  Representative APR 18.9% variable.

0.2 Avios per £1 – IHG Rewards Club Visa.  This card is free.  You earn 1 IHG Rewards Club point per £1 spent which converts at 5:1 into Avios points.  The minimum transfer is 10,000 IHG points.  Representative APR 18.9% variable.

0.2 Avios per £1 – TSB Avios Mastercard.  This card is free and comes with an American Express card as well.  Representative APR 17.9% variable.

0.2 Avios per £1 – Lloyds Choice Rewards Mastercard.  This card has a £24 annual fee and comes with an American Express card as well.  Representative APR 23.7% variable including fee based on a notional £1200 credit limit.

If you are wondering where the Marriott Rewards card has gone, this is not currently accepting new applications.  I do not know why.

In theory, looking at this list, the Tesco card is STILL the best free option if you can’t get HSBC Premier.  The Tesco card will continue to be more generous than the fee-paying Lloyds and TSB cards.  It is also £99 cheaper per year than the IHG card.

Unfortunately it isn’t that simple.  You should think about the following:

Should you forget Avios entirely?

0.3 Avios per £1 from Tesco is still poor, even though it beats the Lloyds and TSB cards.  You could get the Asda Money card and earn 0.5% cashback or the House of Fraser Mastercard and get 1% of your spending back in House of Fraser vouchers.

Should you value ‘alternative use’ points more highly?

Clubcard vouchers have alternative uses.  They are more flexible than the Lloyds or TSB Avios cards which only give Avios.  With Clubcard, you could redeem for something else if a better deal came along.

The Lloyds Choice Rewards card DOES offer alternative reward options, including shopping vouchers.  The Hilton and IHG cards offer points which can be used for hotel stays if you choose not to convert to Avios.

Every so often, BA offers a 25% bonus when you convert hotel points into Avios.  This would make the Hilton and IHG cards more valuable than I imply above.

Don’t forget to consider fees

The Tesco card is free.  The Lloyds cards and the premium TSB cards have fees.  On the other hand, the Lloyds cards have NO foreign exchange fees.  This makes them good cards to use abroad.

Don’t forget to consider sign-up bonuses

The basic Lloyds card comes with 4,500 Avios if I refer you via the refer-a-friend scheme.  This offsets the £24 fee for the first year.

But, of course, the Tesco card also comes with a 2,400 Avios sign-up bonus if you complete the refer-a-friend form (this can be done up to 3 months AFTER you have received your card).  Email me at rob at headforpoints.com if you want the form sending over.

The Hilton HHonors card comes with a free night in any Hilton Group hotel for spending £750.  The two IHG Rewards Club cards some with 10,000 and 20,000 IHG points respectively.

Consider extra benefits on top of the Avios – these can be valuable

The Lloyds cards come with upgrade vouchers and, on the Premier version, a 241 voucher for economy BA redemptions when you spend £12,000.  Spending on the Mastercard counts towards these vouchers which may offset the lower earning rate and the need to pay a fee. 

The IHG Premium Visa comes with a free night at any IHG hotels, including the five-star InterContinental chain, when you spend £10,000 per year.  You also receive Platinum (mid tier) status in IHG Rewards Club for as long as you hold the card.

The £50 TSB card comes with a 241 voucher for economy BA redemptions after spending £15,000.  Spending on the Mastercard counts towards this voucher.

And finally ….

There is no guarantee that the earning rates on the non-Tesco cards I mention above will not get worse, so we may not be comparing like with like.

Luckily, for now, I am immune to all of this as I still have my bmi Diamond Club Mastercard which pays a whopping 2.5 Avios per £1 in return for my £60 annual fee.  It isn’t clear how long British Airways will keep this card alive.

If you want to learn more about the other cards I mention above:

My review of the HSBC Premier Mastercard is here

My review of the Lloyds Avios Rewards card is here

My review of the Lloyds Premier Avios Rewards card is here

My review of the Lloyds Choice Rewards card is here

My review of the TSB Avios card is here

My review of the TSB Premier Avios card is here

My review of the IHG Rewards Club Visa is here

My review of the IHG Rewards Club Premium Visa is here

My review of the Hilton HHonors Platinum Visa is here

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Want to earn more points from credit cards? – March 2023 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.

SPECIAL OFFER: Successfully apply for either of the Barclaycard Avios credit cards by 2nd April 2023 and you will be entered into a free draw to win ONE MILLION AVIOS! Full details are on the application forms here (free) and here (paid). This competition is exclusive to Head for Points readers. T&C apply.

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:

Until 30th March 2023, the sign up bonus on American Express Business Platinum is increased to 120,000 Membership Rewards points – click here. The bonus on American Express Business Gold is increased to 60,000 Membership Rewards points – click here. T&C apply, see the application forms for details.

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.