Maximise your Avios, air miles and hotel points

What is the future of airline credit cards in the UK?

Links on Head for Points may support the site by paying a commission.  See here for all partner links.

I wrote this article last week for potential use in another publication.  It seemed a shame not to run it on here too.  Whilst very little in this article will be new to regular readers, it does pull together a lot of news and ideas from various different HfP articles into one place for the first time.

On Monday 6th November, all eight UK airline credit cards issued by MBNA were closed to new applicants without any warning.  This meant that 75% of the UK airline credit cards disappeared overnight to new applicants.

This article explains:

What cards have gone
Why it happened
What cards consumers should focus on now if they want to collect airline miles
How I believe the airline and broader loyalty credit card sector in the UK should evolve if it is to survive the world of 0.3% interchange fees

What cards were withdrawn on 6th November?

These are the UK airline credit cards you can no longer apply for:

Lufthansa Miles & More
Emirates Skywards
Emirates Skywards Elite
Virgin Flying Club White
Virgin Flying Club Black
Etihad Guest
United Airlines MileagePlus
American Airlines AAdvantage

I know that the two Virgin Atlantic cards will return shortly under the Virgin Money banner. There are no confirmed plans for the other cards to return under a new issuer. 

I know that some early stage discussions are taking place with niche low-cost card issuers – there is an opportunity here for someone to come into the market and pick up these contracts if they can make the numbers work.

Why did 80% of the UK airline credit card market disappear?

Today, the only UK airline credit cards still open to new applications are the two British Airways Avios credit cards (one from American Express, one from Lloyds) and the very small Flybe credit card.

Two linked events caused this. The core driver was the European Union cap on interchange fees charged by Visa and Mastercard.

The EU believed that Visa and Mastercard were operating an oligopoly. It claimed, arguably correctly, that the two companies were exploiting their oligopoly on payment processing by charging disproportionate fees, especially as all of the risk was taken by the retailer (in case of chargebacks) and the card issuer (in case of bad debts).

New rules brought in last year restricted the fee that payment processors could charge retailers for accepting credit cards to 0.3%. It is very difficult to run a successful mileage card on this basis – if you earn 0.3p per £1 spent, you cannot pay an airline 0.5p to 1p per £1 to buy the cardholder an air mile!

There is interest income, but airline cards tend to be held by wealthier people who do not run a balance. The only other source of income is the 3% foreign exchange fee, but increased awareness of specialist 0% FX fee cards such as Halifax Clarity has cut this income stream too.

How did American Express get dragged into this?

The second driver was American Express being caught up in the 0.3% cap, even though it was originally expected to be exempt.

In theory, American Express should have nothing to do with this. Amex is vertically integrated and there is no intermediary sitting between the retailer and Amex who is adding additional fees. A retailer was free to either work with Amex, paying the fees they requested, or not.

There was no doubt that American Express could no longer issue franchised cards in the UK as, under the convoluted EU interchange rules, they were capped at 0.3%. This meant that MBNA, Lloyds, TSB and Barclays had to stop issuing Amex-branded products. (The Lloyds Avios Amex is still being issued but the end is nigh.)

Weirdly, even ‘directly issued’ Amex cards are being capped

Back in July, the EU’s Advocate General ruled against an American Express appeal that it should not have fees on its co-brand cards capped.

This primarily impacts the British Airways American Express card. With over £1 billion of monthly billings, it is by far the most successful travel credit card in the UK.

This Head for Points article goes into this ruling in more detail.

The bottom line is that unless the EU court throws out the preliminary view of the Advocate General – which is rare – the British Airways Amex will be at risk too. The current generous benefits package cannot be funded if merchant fees are cut from 1.75% to 0.3%.

The ONLY personal credit and charge cards which will remain outside the interchange fee cap are non co-branded Amex products – Gold, Green and Platinum.

What can customers do if they still want to collect airline miles?

The British Airways American Express credit cards, and the Lloyds Avios Rewards credit cards, are – for now – still available.

ALL other airline credit cards have been closed, apart from the small Flybe card.  Some may return next year in a different guise – I will discuss in a minute what that guise may be.

You can still earn airline miles via American Express Membership Rewards points.  I recommend American Express Preferred Rewards Gold as the best choice. This card is free for the first year, comes with a 20,000 points sign-up bonus and comes with two free airport lounge passes.

Amex points can be transferred at 1:1 into three of the airlines whose cards were closed – Virgin Atlantic, Etihad and Emirates.

Anyone wanting Lufthansa, United or American Airlines miles should take the Starwood Preferred Guest American Express card instead. Whilst this is a hotel credit card, the points transfer into almost 30 airline schemes at 1:1 (United is 2:1). The card does have a £75 annual fee.

How will this change the face of travel loyalty cards?

For years, credit cards have been a licence to print money for airline loyalty schemes in the UK. It is believed that 2/3rd of income from the sale of miles to third parties comes from financial services companies.

It’s not just about money though.

Co-brand credit cards are an amazing marketing tool. The value to British Airways of having you see their brand every time you pay for something is HUGE.

Going forwards, these cards will not be able to offer huge numbers of miles per £1 spent. So, what now?

I have been arguing for a while that I expect airline status to become available via a UK credit card in the medium term. Here are two possible scenarios I envisage could happen (these examples are both made up, of course):

Would you pay £495 for a new British Airways Elite American Express card which came with BA Silver status, giving you airport lounge access, fast track security and priority boarding, potentially with a high spending threshold?

Would you pay £195 for the British Airways Premium Plus if the earning rate was cut to 1 Avios per £1 but you also received free British Airways Bronze status? This would give you fast track security and free seat selection.

This is the future, I believe. A future where co-brand partners need to bring more to the table if they want to keep their logo in your wallet as a marketing tool.

For years the airlines have had it all their own way. They found a way of placing their logo in a prominent position – on a payment card – where you would see it every day. And, instead of actually paying for this exposure, they were making money, lots of money, from it.

Those days are gone. MBNA’s actions in culling eight airline cards overnight proved it. It would be a foolhardy loyalty programme that decided to walk away from such an amazing marketing tool though, even if they have to actually spend money – instead of making money – to achieve it.

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:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

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

Barclaycard Avios card

Barclaycard Avios Mastercard

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

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

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

The Platinum Card from American Express

40,000 bonus points and a huge range of valuable benefits – for a fee Read our full review

Virgin Atlantic Reward+ Mastercard

15,000 bonus points and 1.5 points for every £1 you spend Read our full review

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

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

American Express Business Platinum

40,000 points sign-up bonus and an annual £200 Amex Travel credit Read our full review

American Express Business Gold

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

Capital on Tap Business Rewards Visa

Huge 30,000 points bonus until 12th May 2024 Read our full review

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

American Express Gold card, American Express Platinum card, British Airways American Express

Comments (138)

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

  • John says:
    19 Nov19 November 04:50

    I thought it was the interchange fee between banks rather than the “fee that payment processors could charge retailers” that is being capped at 0.3%?

    • Polly says:
      19 Nov19 November 05:56

      Yes that’s correct. My insurer insists on still.charging us 2.5% as a payment process fee until l suggested they update their systems. They then refunded me the amount even tho l didn’t ask. Other said they didn’t have to change that fee until they are forced to by law next year.

  • Al says:
    19 Nov19 November 05:17

    Not so sure I agree with your view that the value of having the airline’s logo in your wallet has huge value.

    For corporate travel, decisions are driven by corporate policies rather than advertisements in your wallet.

    For personal travel, frequent travellers will most likely be more influenced by the status which they hold. OTOH casual and budget-conscious travellers (without status) are increasingly getting educated enough to cross-check prices across various airlines before purchasing a fare.

    It might work if the airline is small and relatively unknown. But my gut feel is that airlines of low budgets will be better off spending their marketing money on direct discounts. The only exception to this – i would imagine – would be high budget low profile outfits, possibly semi-chartered “airlines” which you have reviewed before.

  • JamesB says:
    19 Nov19 November 05:23

    A partial solution to the problem of the disappeared cards is quite simple: those that are not already MR rewards partners in the UK become so. This would boost the airlines, amex and their customers too. Airline brand visibility would still suffer though and there would still be the issue of amex acceptability but within the UK there are few places I can no longer use amex directly or indirectly. A vision of the future in which status becomes a primary driver of airline credit cards is dreadful, the ease of obtaining airline status has IMO been slowly strangling the frequent flyer industry for years now, everything from lounges to boarding have becone less pleasant as a result of increasing numbers of passengers with status. A further boost in status numbers via credit cards is the last thing we need. If anything, the airlines need to restrict status earning to flown miles only, reduce the benefits of status, and get back to giving passengers what they pay for on tickets, not what they pay for via credit card fees or other status earning ‘tricks:

  • Polly says:
    19 Nov19 November 05:52

    I think offering silver status to a bapp amex card holder for a higher fee would definitely devalue the status earned by those business people earning a few TPs at a time on every trip. Just don’t think BA would risk that. It would upset too many of their SCH and GCH community. Silver could be too easily earned l think. Lounges would be swamped. 1000s would grab that card in a heartbeat. Imagine obtaining Silver with such ease. Too risky..but who knows..
    James are you in Asia too atm?

    • JamesB says:
      19 Nov19 November 06:09

      Agree it is risky, most major airlines have got themselves into a hole with status and they will have to stop digging at some point. Accor grabbed the bull by the horns in the hotel sector but I have no idea how it is working out for them. No, travels are over for the year here, first time for a few years I can take advantage of shop small. Are you on your Bali trip? If so, enjoy.

      • Polly says:
        19 Nov19 November 06:21

        Have fun shopping then..we will be back for it . Had a look at local shops some good one too. Years supply of stamps coming up for sure..
        Not Bali but HEL hkt one…old bones need the warmth in Nov! Tnx.

  • Ian says:
    19 Nov19 November 06:07

    I like the idea of more airlines becoming MR partners. But the earning rate even on the Amex Platinum is too low in my opinion. You actually earn more with the Gold card (because of the annual bonus if you spend enough) than you do with the platinum which is ridiculous!

    Increase the earning rate on the Platinum card to 1.5 MR per pound and introduce an annual bonus of 20,000 points if you spend more than £40k per year and that would be a card I would keep in my wallet rather than churn.

    • JamesB says:
      19 Nov19 November 06:13

      Getting your letter to Santa in early Ian 🙂

    • Edd M says:
      19 Nov19 November 07:50

      I totally agree that the Platinum package is much too mean!

      I would swap my 195GBP BA Amex for the 450GBP Platinum if the mileage earning rate was the same, as I don’t know how much real value I get from the 241 if I’m totally honest. It’s silly that this prestige card earns so little. The rate needs to be boosted to at least 1.5 rewards points per pound. An alternative would be 1 point per pound on general spend; 2 points for travel and fuel. Otherwise there’s no incentive for continued spending on it.

      • Ian says:
        19 Nov19 November 08:36

        Yeah it makes no sense. Why keep hold of the Platinum card when you earn more from the BA, SPG and even the Gold card (with the annual bonus plus double points on airline spend).

        The US Platinum card has a 60,000 point sign up bonus and x5 points on airline spend!

        Does anyone know why Amex make the Platinum one of their least attractive cards for ongoing spend?

        • Dominic says:
          19 Nov19 November 09:48

          I keep the platinum for the benefits but currently put all my spend on the gold card. When I reach 15k spend the card remains in my wallet whilst I sign up for other cards to hit sign up bonuses. When the 10k bonus MR are in my account I cancel and apply again in a few months.

          That way I get over 1.5 MR/£ earning rate on the gold and I never pay a fee. Works best for me as I’d rather have 1.5 MR/£ rather than 1.5 avios/£ with the BA card. Don’t use BA and I can use the MR points for much more. Shame the platinum is so poor with 1 MR/£.

        • Ian says:
          19 Nov19 November 09:56

          That’s interesting Dominic, I was under the impression that the bonus points on the Gold were posted on your card anniversary? How soon after hitting the £15k spend does the bonus land in your account?

        • Rob says:
          19 Nov19 November 09:57

          Because they can, I think.

        • Dominic says:
          19 Nov19 November 10:15

          They are posted on anniversary. But whilst I’m waiting for that date I use other cards to get sign up bonuses. I don’t have to worry about cancelling ASAP as there is no fee in year one.

          Then on anniversary I cancel the gold and wait a few months to apply again, again using other cards whilst waiting. I don’t get the sign up bonus on the gold as I have the platinum and don’t wait six months, but that isn’t the point. I do it for the higher earning rate with no annual fee. I tend to fly solo and live in the north so I wouldn’t get any value from 241 which makes me different to a lot on here.

        • Ian says:
          19 Nov19 November 13:06

          Ah ok I see. I like to churn the platinum card for the big bonus. I was lucky to be able to refer 3 people for the gold recently and got 54k in total for that (thought u would get 27k!).

          If there was a good sized annual bonus on the platinum or higher earning rate perhaps I’d keep hold of it, but for me nothing comes close to the SPG card which I put a lot of spend through.

      • Alan says:
        19 Nov19 November 10:23

        Yep, Plat earning has always been atrocious – the Costco Amex is far better!! Really wish they’d do something to improve it then I’d actually put more spend through on it.

  • Xmenlongshot says:
    19 Nov19 November 06:57

    I just got through my Lufthansa replacement Amex as my existing card was expiring in December.

    Got 3yrs validity although the real question is when they turn off mileage earning – any guesses Rob?

    • RussellH says:
      19 Nov19 November 11:14

      +1

      And wondering the same thing too.

      • Cat says:
        19 Nov19 November 22:13

        + 1, but worried that I will lose all my M&M miles with Lufthansa’s strict expiry policy, in the absence of a card to protect them.
        I have 53,000 miles, and I need 85,000 to try their first class terminal on a one way ticket. So near, and yet so far…

  • Charlie T. says:
    19 Nov19 November 07:42

    My $0.02.

    Surely Amex can release a card which technically earns MR points at 1/£ but auto converts them to Avios in BAEC with a guaranteed 50% bonus if you commit to auto conversion for e.g. 3yrs at a time.

    Coincidentally, you might also earn a 2-4-1 if you spent £10k and you’d be charged a fee of say £195 pa for this option.

    No co-branding in sight so the EU can’t get randomly upset.

    Throw in auto-conversion of BAPP cards to this card and scheme (with the necessary opt outs) and this is a better solution from BA’s perspective (or, moreover the existing BAEC status holding community) than selling silver, I would think.

    I’m in the camp that doesn’t really see the value in having a “brand in the wallet” – more the value of people pushing their spend always by default towards their FF program of choice and would therefore see an Amex with autoconversion to BAEC as of (almost) the same value to BA as a BAPP.

  • Luke says:
    19 Nov19 November 08:07

    This may be a silly question, however I have a big trip booked to the US in February, all hotels have been booked using my Lloyd’s avois Duo Amex. (Genuine American transactions rather than the ‘bonus’ fraudulent ones I had the pleasure of dealing with)
    If the Lloyds Amex is withdrawn, what does that mean for current holders? How quickly for current users could/would that take effect?

    • John says:
      19 Nov19 November 08:18

      Whatever the T&Cs say so probably 2 months, but they may keep it going for a year or more like bmi

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

New to Head for Points?

Welcome!  We’re the UK’s most-read source of business travel, Avios, frequent flyer and hotel loyalty news. Let us improve how you travel. Got any questions? Ask them in our forums.

Latest Forum Posts

Get 40,000 bonus points (worth 40,000 Avios) and £300 dining credit with The Platinum Card

Check reward flight availability instantly for free!

See a whole year of reward seat availability on one page at SeatSpy.com

Get £10 when you spend £150 on your free Currensea card

Booking a luxury hotel?

Our luxury hotel booking service offers you GUARANTEED extra benefits over booking direct. Works with Four Seasons, Mandarin Oriental, The Ritz Carlton, St Regis and more. We've booked £1.7 million of rooms to date. Click for details.

SME? SPECIAL OFFER TO 12TH MAY EARN POINTS WORTH 30,000 AVIOS WITH CAPITAL ON TAP

Get 20,000 bonus points, four airport lounge passes and your first year free with American Express Gold

The UK's biggest frequent flyer website uses cookies, which you can block via your browser settings. Continuing implies your consent to this policy. Our privacy policy is here.

Got it!