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What I learned at the Co-Brand Credit Card Conference yesterday

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Anika and I were at the UK’s only annual co-brand credit card conference yesterday where representatives from most of the card groups we discuss on Head for Points meet up to discuss what is happening in the industry.  Which, at the moment, is obviously quite a lot.

If you are interested in seeing what I spoke about – none of which will be a surprise to regular readers – you can download my slides (PDF) by clicking the image below.

I would like to be able to say that we came away with an exciting new vision for where the co-brand card market is going, but we didn’t.  “No-one knows nuffin” it seems, so far.

This is what we did pick up:

One consultant felt that the impact of 0.3% interchange fees is not as bad as expected.  His logic was this:

30% – 40% fall in interchange revenue, but offset by

15% – 20% recovered through interest rate rises, annual fee rises, other tweaks

I am not convinced, partly because I do not feel that interest rate revenue is that high, and because only one card (BA Premium Plus) has hiked its fee.  I doubt MBNA would have killed its entire airline product line if the net revenue drop was only 20%.  This view only holds water if the card companies ditch their highest spending customers and attempt to sign up more people who pay interest – and there are few of those in the core London business traveller market.

Other interesting titbits:

One of the longer established co-brand travel cards has just started a root and branch review which is likely to see a substantially changed product emerge.  In this particular case it might actually be positive.

We may see cards try to reign in costs via benefit cuts (no 2-4-1 voucher?) or caps on points earning – or perhaps staggered earning tiers which reduce depending on how much you charge.  Big spenders are now a problem as the marginal miles cost exceeds the marginal interchange fee.

Cardholders are seen as insensitive to rises in fees and interest rates – seemingly true in the case of the BA Premium Plus fee rise, I agree

The current operating model (airline takes all its revenue via sign-up commissions and a ‘pence per mile’ payment) is broken.  Future co-brand agreements should be treated as ‘open book’ joint ventures with a 50 / 50 profit split, with the airline or hotel group having to accept that it is now in the credit card business.

Card data needs to become a greater source of value.  Apparently American Express has never delivered on the promises of ‘big data’ it made to British Airways.  The ability to use card data – perhaps using PSD2 to add data from other cards – must improve.  This may involve doing things which seem illogical, eg if the BAPP Amex offered double Avios on all airline purchases – not just with BA – then BA would get a better picture of how much you were spending with other carriers and could act accordingly.

‘Card linked offers’ such as the Avios and Virgin ‘in-store earning’ deals are seen as a valuable source of revenue going forward.  (Off the point, but apparently Head for Points is entirely responsible for the many changes to the Virgin / Waitrose in-store deal, because it went so crazy after we originally wrote about it that the budget was blown very quickly and emergency action was required!).

The good news is that there was not a major sense of despair in the room.  All of the parties have too much at stake.

(Want to earn more miles and points from credit cards?  Click here to visit our dedicated airline and hotel travel credit cards page or use the ‘Credit Cards Update’ link in the menu bar at the top of the page.)

Comments (195)

  • Paxtonfan says:

    Having learned how cheap a crew standby ticket for immediate family members is in CW, it puts the whole thing into a new perspective. On a personal note, as someone without “status” who flies almost exclusively to the US, I try to earn a 2-4-1 which just about makes BA viable once fees, taxes, seat reservation charges, card fees etc are totted up. Otherwise, if I am converting AMEX points I prefer my redemptions on VA because it is simply a better product and the LHR clubhouse is light years better than The Galleries. After that I prefer American because I prefer the daytime return flight from the US and I can choose my seats at the time of booking. After that paying Cash for Norwegian has a better value to comfort ratio than some of the battered worn out aircraft I have experienced this year with BA and it infuriates me that BA don’t participate in the Global Entry scheme. I can only assume that MR Cruz’s business model is working for them so don’t expect any improvement any time soon. OT, I saw BA referred to on the BBC website as the National Carrier. I would like to see them forced to drop the word British from their title. Spanish Consortium Airlines sounds about right.

  • JamesB says:

    OT but credit cards: Are the amex gold and platinum companion credit card applications subject to full credut checks or is it a soft check like supps?

    • Alex W says:

      I just got a deferred decision if that means anything. But that is normal for me, I think because I have changed addresses a lot.

      • RussellH says:

        All my Amex applications, apart from (ironically) my very first, have been deferred. I suspect that they may have taken on a new, but less accurate address database, where the field names do not match with those used for the electoral role.
        Where I live, there are no house numbers and no street names, but on the application I made two days ago I noticed that street name is a compulsory field. The name of the village was completely left out of the address generated from the postcode (and the only place I could insert it was in the street field), and the name of the house was split between the flat number and house name fields (I do not live in a flat).
        There is a really bad address database around that SPG use – it does not recognise my postcode and is convinced that I live in a rather rundown part of the town 10 miles away. I had thought that it was just SPG – until I found the same rubbish appearing on a totally unrelated website a couple of weeks ago.

      • JamesB says:

        Thanks, I’ll give it another month before applying.

  • Robin says:

    apologies off-topic but no bits today.
    I have an Amex Platinum which has the car hire excess insurance as a benefit. Can anyone tell me if I have to pay with the Amex Platinum card and does it matter if I prepay or pay later at the time of completing the rental?