When is it worth paying an annual fee for a miles and points credit card?

I get numerous emails from Head for Points readers asking for advice on which miles and points credit card they should get.  These often come with the caveat “but I don’t want to pay a fee for a card”.

I don’t agree with this approach.  Let me explain why.

Most credit cards in the UK do not carry an annual fee.  It is very likely, before you became interested in miles and points, that you had never paid a fee for a credit card in your life.

I can see why you wouldn’t want to:

• you know that the card company gets a cut from the retailer every time you buy something

• you know that the issuer adds a 3% foreign exchange fee whenever you spend abroad, and a fee whenever you end up withdrawing some cash on it (which, however much you try to avoid it, always happens once or twice)

• you may accidentally miss a payment date occasionally, or your direct debit bounces, and you run up some interest

Paying for the privilege of generating this revenue for the credit card company may seem wrong.

I think you need to look at it differently.  Forget that you are paying for a credit card.  Look at it as simply paying for the benefits offered.

For want of a better way of looking at, assume that your credit card is a book of discount vouchers. What would you pay for it?

Take the British Airways Premium Plus card as an example ….

Some people take one look at the £250 annual fee on the British Airways American Express Premium Plus credit card and are instantly put off.

Purely from the point of view of the sign-up bonus, being put off by the fee is a mistake.  The card is currently offering 25,000 Avios for signing up when you spend £3,000 within 90 days.  Many Head for Points readers would jump at the chance of buying 25,000 Avios for £250 which is basically what you are doing.

(The Barclaycard Avios Plus Mastercard has a similar deal. Sign up and get 25,000 Avos if you spend £3,000 within 90 days. Click here to learn more.)

The fee becomes even more realistic when you look at the benefits of the 2-4-1 companion voucher. You receive a voucher each year when you spend £10,000 on the card.

Would you pay £250 to buy a voucher which allowed you to get two Avios redemptions (British Airways, Iberia or Aer Lingus aircraft only) for the points of one?

Especially if you got access to extra reward seats in business class that non-cardholders can’t book? 

This would save you up to 220,000 Avios on two Club World tickets to Tokyo for example.

This is clearly a ‘no brainer’ for anyone who understands the value of Avios.  220,000 Avios are worth at least £2,200 if used sensibly.  More importantly, if you wouldn’t otherwise be able to earn enough Avios for two Club World tickets to Tokyo, it lets you undertake a trip that would otherwise be impossible.

The voucher also works well for a solo traveller – you save 50% on the Avios required for a ticket for one person if you travel alone. In our Tokyo example, you would save 110,000 Avios in Club World.

You need to spend £10,000 to trigger the voucher each year, of course, but you need to channel your credit card spend somewhere.

Compared to the free British Airways American Express card, the £250 fee also lets you earn 50% more Avios on every purchase and earn double Avios on British Airways and BA Holidays spend.

The Premium Plus card voucher also has two huge advantages over the voucher you get from the free card – it is valid for two years rather than one year and it is usable in ALL classes rather than just Economy.

And some other examples ….

Here are some other examples where, if you treat the fee as paying for a benefits package, it makes sense:

Virgin Atlantic Reward+ Mastercard

Would you pay £160 per year for the right to upgrade two Virgin Atlantic tickets (cash OR redemptions – Virgin lets you ugprade cash tickets too) from economy to premium economy, or from premium economy to Upper Class? Or to get a 2-4-1 voucher for economy or premium economy cash or premium economy redemptions?  Especially if you also got 15,000 Virgin Points in the first year for signing up?

When you put it like that, the Virgin Atlantic Reward+ Mastercard looks good value (you need to spend £10,000 to trigger the annual voucher).  This is before you factor in the excellent ‘1.5 miles per £1’ earning rate.

The Platinum Card from American Express

Would you pay £650 per year to get £300 of dining credit, £100 of Harvey Nichols credit, travel insurance for your family, car hire insurance, Hilton Honors Gold, Marriott Bonvoy Gold, Radisson Rewards Premium, Melia Rewards Gold, Eurostar lounge access, Delta Air Line lounge access, two Priority Pass cards each admitting two people for free to 1400 airport lounges and exclusive benefits at luxury hotels including guaranteed 4pm check-out?  Especially if you got 40,000 Avios or other miles as a bonus in your first year?

This is clearly more of a ‘heavy hitters’ package, but the American Express Platinum card will give you all of the above.

Not all credit cards justify their fee ….

I don’t want to suggest that all fee-bearing miles and points cards justify the annual fee.

• American Express Preferred Rewards Gold is harder to justify after the free first year.  You are paying £195 from Year 2, with the main benefit being four free airport lounge passes and 24 x £5 Deliveroo credits.  It might work if you spend enough to trigger the spending bonuses of up to 12,500 Membership Rewards points per year but otherwise I would consider it marginal.

• The £240 annual fee for the Barclaycard Avios Plus Mastercard is trickier to justify after the first year if you are a big spender. The annual upgrade voucher is identical on the free card and the £240 card – the only difference is that the paid card triggers it at £10,000 of spend and the free card at £20,000 of spend. If you can hit £20,000 easily then the extra 0.5 Avios per £1 earned on your spending doesn’t offset the fee.

• The Marriott Bonvoy American Express card has a £95 fee.  For the first year it is worth it for the 20,000 Marriott Bonvoy points sign-up bonus.  Earning just 2 Marriott Bonvoy points per £1, you need to a big spender to justify £95 for Year 2+.  The real value here is the 15 elite night credits you get each year – most people treat it as a cheap way of getting a head start on status renewal – but if you’re not chasing Gold, Platinum or Titanium Marriott status then this isn’t relevant.

These three examples show that not all fee-based cards necessarily offer long-term value.  However, if you can get your head around the concept of paying an annual fee, you will find that many miles and points card do offer value for money.

Learn more about the credit cards mentioned above

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

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:

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.

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.