Why the free BA Amex is a bad deal for low spenders (after we said it was a bad deal for high spenders)

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Last Monday I ran this article on why I don’t believe that anyone should be spending £20,000 on the free British Airways American Express card in order to trigger the 2-4-1 voucher.

For a high spender, the free British Airways American Express card makes no sense.  If you could spend £20,000 on the free BA Amex card to trigger the 2-4-1, I think you are better off spending £195 to get the Premium Plus card instead.  This is because:

The 241 voucher is only valid for one year on the free BA Amex, instead of two years for the BA Premium Plus voucher, which is a major issue if you want to book seats 355 days in advance!

The £10,000 of ‘extra’ spending required to trigger the voucher on the free card (£20,000 compared to £10,000 on the Premium Plus card) could be directed elsewhere, triggering sign-up bonuses on other cards

You earn an extra 0.5 Avios per £1 spent, which offsets much of the £195 annual fee on the Premium Plus card

The bottom line is that the only people who I think should have the free British Airways American Express card are those who spend under £10,000 per year.

But even that is a bad idea, if we’re honest

I know that a lot of people don’t spend large amounts on their free BA Amex card.  They don’t trigger the 2-4-1 companion voucher BUT they like earning 1 Avios for every £1 they spend.

If this is you, you are now better off with the new and little-known American Express Rewards Credit Card.

Amex Rewards Credit Card

What is the American Express Rewards Credit Card?

ARCC is a standard Amex-branded credit card.  It has no annual fee and no substantial benefits, except for the ability to collect Membership Rewards points at 1 point per £1 spent.

There are three versions of the card available:

LOW RATE – 5,000 Membership Rewards points bonus and a representative APR of 9.9% variable (click here)

or

BASIC – 10,000 Membership Rewards points bonus and a representative APR of 22.9% variable (click here)

or

PURCHASES – NO sign-up bonus but 0% APR on purchases for 18 months and a representative APR of 22.9% variable beyond that (click here)

The first two cards require a £500 (5,000 points version) or £1,000 (10,000 points version) spend within three months to trigger the bonus.

You will not get the sign-up bonus if you have had a Gold or Platinum American Express card – or any other Amex card which gives Membership Rewards points – in the last six months.  You can still apply for the card, however.

Why is the Amex Rewards Credit Card better than the free BA Amex card for low spenders?

Here’s the interesting bit:

The free British Airways American Express card earns 1 Avios per £1 spent

The free Amex Rewards Credit Card earns 1 Membership Rewards point per £1 spent.  These transfer 1:1 into Avios points if that is what you choose to do.

What you get with the ARCC card is flexibility.

Yes, you can use your points for Avios.  You can send them over to BA via the Amex website and they will arrive within 48 hours.

However, you have other options.  Membership Rewards points can also be sent to Virgin Atlantic, Flying Blue, Emirates, Etihad and Delta among other airline partners.  You can also send them to Hilton Honors (1:2), Starwood Preferred Guest (2:1) and Radisson Rewards (1:3).  You can convert them to Club Eurostar (15:1).  You can even use them for shopping vouchers.  You can see the airline partners here.

The new ARCC card gives you more choice.  You can still take Avios if you want, and at the same 1 Avios per £1 earning rate.  If you suddenly decide that you want hotel points, or that Virgin Atlantic miles make more sense, or even that you want to abandon Avios altogether, you can.  Simply move your Amex points somewhere else instead.

With the free BA Amex card, your points are sitting in Avios from Day 1 and you can’t do anything else with them.  If Avios devalues its rewards, if BA stops flying your preferred route, if reward availability suddenly gets a lot harder to find, if Reward Flight Saver fees jump up, if new surcharges get added ….. you’re stuck.

Swapping to the Amex Rewards Credit Card gives you more control over your points.

The only good reason NOT to drop your free BA Amex is that having the ARCC card means that you cannot get a sign-up bonus on an Amex Gold or Amex Platinum card at the same time.  On the other hand, once you have gone six months without the free BA Amex, you would be able to apply for either of the two BA cards again, purely to earn a sign-up bonus.

Conclusion

There are good reasons for EVERY holder of the free British Airways American Express card to reconsider.

If you spend over £20,000 on the free BA Amex card to trigger the 241 voucher, I think you’re making a mistake as my article last Monday explained 

For lower spenders, who aren’t bothered about the 241 voucher, I believe that the Amex Rewards Credit Card offers a compelling alternative to the free BA Amex

Even better, two versions of the FREE ARCC card – Low Rate and Basic – offer an attractive sign-up bonus if you haven’t had a Gold or Platinum American Express card in the last six months.

If you go for the ‘Purchases’ versionyou will also get 18 months interest free credit on everything you buy.

If you go for the ‘Low Rate’ version, you will be paying a representative APR of 9.9% variable.  This is far cheaper than the free British Airways Amex card which charges a whopping representative APR of 22.9% variable.

Something to think about …..

PS.  Why is Amex putting its BA relationship at risk by offering a better card?  Simple.  As this card is not a co-brand card, Amex can charge its full interchange fee to shops.  The BA Amex falls under the EU caps on interchange fees, which means that Amex can charge a maximum of 0.3%.  It now has a big incentive to encourage people to move away from the BA, Starwood and Nectar co-brand cards onto its own products.

(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.)

Disclaimer: Head for Points is a journalistic website. Nothing here should be construed as financial advice, and it is your own responsibility to ensure that any product is right for your circumstances. Recommendations are based primarily on the ability to earn miles and points and do not consider interest rates, service levels or any impact on your credit history.  By recommending financial products on this site, I am – technically – acting as a credit broker.  Robert Burgess, trading as Head for Points, is regulated and authorised by the Financial Conduct Authority to act as a credit broker.

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Comments

  1. @Rob, do you have any articles on the economics of credit cards from the provider’s perspective?

    For example, do they aim to make most of their money from interest? Spending? Annual fees?Why is AMEX Gold free for a year but platinum isn’t? Why provide charge cards rather than credit cards?

    • @andrewseftel says:

      The FCA did a pretty decent write-up as part of their Credit Card Market Study a couple years ago.

      https://www.fca.org.uk/publication/market-studies/ms14-6-2-ccms-annex-5.pdf

      • Varies by card, because propensity to pay interest varies – not many airline cardholders pay interest, similarly I doubt many John Lewis / Waitrose cardholders do. I know Virgin thinks the 3% FX fee will be a serious driver for the new Virgin Atlantic cards, given the propensity of the card base to travel, although there are no extra miles for foreign spend.

        • That sounds like they area little delusional. Those that are more likely o travel more often will spend abroad in the cheapest way they can.

        • @andrewseftel says:

          Missing a trick, I think. Double miles abroad would probably be a bit rich, but some sort of bonus on FX spend (counts double towards a voucher for example) would help shift the card into people’s minds when they’re abroad.

  2. OT, is there any way to see exactly which vessel class we’d be booking on the BA site? Can’t seem to find a way to see if my ticket would fall under Economy lowest, low or flexible. I’m talking before actually purchasing a ticket. Thanks!

  3. Faithy says:

    OT. I have been transferring my mastercard spend through lloyds to Avios. What will happen when Avios closes? Suggestions?

  4. Nigel Williams says:

    One downside of the ARCC is that it stops the churning ability since you Amex rewards account is still open, surely?
    If you are spending so little on the card, then the advantage of so few points being Amex rather than Avios is minimal.

    • It does – but you can churn BA Amex cards of course.

      • When I got the BA AMEX it had a welcome bonus of 9,000 but I haven’t seen that high a bonus since!

        • Peter K says:

          That’s because they lose money on it so would rather you didn’t use it. At least with the premium one they get £195…

  5. The Paw says:

    I got the ARCC low-rate card recently. It turns out that the card has travel insurance (or at least I was given travel insurance) which is not as good as that given with the platinum charge.

    I know that a similar question has been asked and answered for the BA cards before, but I’m asking this question now regarding the low-rate ARCC: if I pay for travel with the ARCC, can I get the platinum insurance if required for a claim? (I don’t know if the ARCC insurance will “override” the platinum insurance even though the platinum insurance is supposed to apply for trips paid with a non-third-party UK-ISSUED Amex – the ARCC seems to be a case in point)

    I’ve contacted Amex but received conflicting info….

    • Platinum insurance applies. For the core medical benefit you don’t even have to pay for your trip with Amex, but travel inconvenience etc is claimable under platinum terms if it’s been put on any UK consumer amex

      • The Paw says:

        Thanks.

        That’s what I would assume given the definition of “card” in the T&C. However, when on online chat with Amex, two different reps gave conflicting info….

  6. Peter K says:

    No. They are completely different products with different rewards (one is cash, the other membership rewards points) so you will need to make a whole new application. You can keep both cards or cancel one and keep the other but you cannot convert one into the other.

  7. I tend to downgrade to the BA blue card once I’ve earned a 2for1. The primary reason being that I understood getting a voucher successfully reinstated in the event that you cancel the redemption can be problematic if you no longer have the card.

    Has anyone had any problems with that, having cancelled the card completely?

    • The last person I spoke to about this had cancelled his BA Amex completely and then booked and cancelled a 241 – he got the voucher back. No guarantees etc etc.

    • Louise says:

      I recently cancelled a 2 for 1 and it went back to my BA account fine. I no longer hold the BA Amex.

      • Hmm in that case I’m probably being over-cautious and would probably be better off cancelling it for churning purposes.

  8. One reason you might go for the BA Blue card over ARCC is that you can upgrade it to the BAPP later if it turns out you will (or have?) hit the £10K threshold. Some have obviously planned to do that from the outset to avoid the fee in the interim….

    • yep good point

    • This is what I do. Depending on the point in the churn cycle with other cards I ‘dip into’ the BA Amex throughout the year and if I get close to the 10k spend target I upgrade the card, hit the target and downgrade/cancel.

    • Paul says:

      Can you get the points from a referral for a ba premium card to someone who already has the basic ba card

  9. Charlie says:

    O/T – The IHG points break is live – there is no published list yet but I have made bookings at those that were released on the preview list.

  10. FlyingChris says:

    Have Amex changed the way referrals work again? Was hoping to refer someone for an SPG from my Platinum, but checking the link under View Our Other Cards lists the new Gold Credit, the Green Amex and a couple of Business cards. I can’t see how to refer BA/SPG etc anymore… Hope they turn back up again!

    • Rob MC says:

      Still working for me. Click credit cards and they’re all there

      • FlyingChris says:

        Panic over! Phew. My adblocker was preventing anything other than the Charge card & Business categories showing at the bottom (for the Plat, and vice versa for the BAPP). Disabling it and all the card categories appeared. Something to be aware of if referring someone else across card currencies that will need to run off Adblock.

        • Ahh adblocker! Thats what it is then. My work around all this time has been to ask the person I have refered to open the link on their mobile.

  11. Alan says:

    Should do. The account you are currently using is in your name, not hers. It certainly doesn’t affect the bonus for getting Gold Cards and I can’t see why the BAPP would be any different

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