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Why Hilton’s proposed new UK credit card could be one of the best

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Hilton Honors sent a few members a questionnaire yesterday seeking their opinion on two new UK credit card options.   And, it has to be said, it looks promising.

I have written before that Hilton is known to be working on a new product to replace the existing Barclays product, now closed to new applicants.  The two scenarios being circulated are both attractive, and one could be great for high spenders.

Here are the two options (click to enlarge):

New Hilton Honors UK credit card options

Let’s summarise this briefly:

Neither scenario has an annual fee (surprising, because in the new 0.3% interchange environment, a fee is one of the few ways to generate revenue)

The proposed sign-up bonus is pretty good for a free card, being worth £33-£50 for £1000 spend

The proposed earning rate for spending at Hilton properties is excellent (4-5 points per £1)

All cardholders get Silver status in Hilton Honors, with Gold (free breakfast) for spending £10,000 in a year

The earning rate would be either 2 points per £1 (worth about 0.66p – very good for a Visa / Mastercard in the current environment) or, far more interesting, 1 point per £1 PLUS a free weekend night voucher at £15,000 and ANOTHER free weekend night voucher at £20,000

Let’s do the maths.

For someone who spends £20,000 on the proposed 2nd version, you would receive:

20,000 Hilton Honors points, worth £66

Gold status in Hilton Honors, which we’ll assume is worth £100 to the average leisure guest over a year

TWO free weekend nights which – if they can be used at any Hilton Group hotel, including the top Conrad and Waldorf Astoria options – could be valued at £500 between them

This gets you £666 of benefits for £20,000 of spending.  This is an attractive 3.3% return.

The proposed 1st version is better for low spenders but less attractive to high spenders.  All you receive is 2 Hilton Honors points per £1 spent, which I value at 0.66p, so a 0.66% return on your spending.  This goes up to 1.66% if the cardholder spent £10,000, earned Hilton Gold status and got £100 of value from the free breakfasts.

How does this compare to other cards on the market?

This is how I value the long-term spending benefits on the airline and hotel credit cards still available to new applicants.  To understand my calculations, read this article.

The free Virgin Money Reward Mastercard varies by status:

  • Base Virgin Flying Club member – up to 2.4% on first £20,000
  • Silver Virgin Flying Club member – up to 3.4% on first £20,000
  • Gold Virgin Flying Club member – up to 6.4% on first £20,000

The £160 Virgin Money Reward+ Mastercard also varies by status:

  • Base Virgin Flying Club member – up to 4.4% on first £10,000
  • Silver Virgin Flying Club member – up to 6.3% on first £10,000
  • Gold Virgin Flying Club member – up to 12.3% on first £10,000

As you can see, if Hilton Honors went with the 2nd proposal above:

It would be more generous for a high spender than the IHG Rewards Club Premium Mastercard 

It would be more generous than the free Virgin Money Reward Mastercard if you don’t have Virgin Flying Club status

I have a proposed tweak though ….

I accept that Hilton Honors may not want to launch a card which requires £20,000 of expenditure to unlock all of the benefits.  It excludes a lot of the potential market.

I would be tempted to ‘do an IHG’ and have two variants:

as ‘Option X’ above, a free card earning 2 points per £1, giving Silver status to everyone and Gold at £10,000

a revised ‘Option Y’ with an annual fee of, say, £75 but with a higher earning rate of 2 points per £1 plus the two free night vouchers for spending £20,000

My revised ‘Option Y’ is actually a better deal for Hilton than their ‘Option Y’ except when dealing with ultra-high spenders.  One way around this would be to reduce the earning rate to 1 point per £1 after spending, say, £50,000 per year.

On £20,000 of annual spend they would be giving out 20,000 additional Hilton Honors points but they are getting a £75 fee – albeit the card issuer will want a cut.

Importantly, both of the cards I outline above would be more attractive than their respective IHG Rewards Club variants.  The free card would also be more attractive than the Marriott Rewards Mastercard, assuming that it returns to the market next month with the same benefits package (1 point per £1, no long-term spend incentive) as the old version.

Conclusion

If Hilton Honors does go ahead and launches a free Mastercard /  Visa product offering two free weekend nights EVERY YEAR for spending £20,000, I think it would have substantial appeal to Head for Points readers.  A product which got you a free 2-night weekend break every year at Hilton Venice, Conrad London St James, Waldorf Astoria Rome, Waldorf Astoria Berlin etc would be very tempting.

It isn’t that clear cut of course.  I am assuming that the free night voucher can be used at any hotel, which may not be the case.  Restricting it to weekend use also makes it less flexible.

Make no mistake though – I would be getting one of these cards if they did come to market.  (I am less excited by the version with no free nights, so let’s hope Hilton drops that one!)  Thanks to Andrew for the screenshot.

(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.)

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Comments

  1. @mkcol says:

    I had the same survey yesterday & wondered if anyone else would.

    I voted several times for Option Y but also said I’d like Diamond status to be a benefit offered.

  2. Thomas Howard says:

    OT: Anyone know how much longer we’ve got to earn our Lloyds Avios creditcard upgrade vouchers before they pull/revamp the offer?

    • I keep posting about this! I spoke to them on Monday, they said there is no date for removing avios and voucher earning, but if they do decide to do it we will get 90 days’ notice.

  3. Andrew says:

    Can someone please clarify something about the 0.3% interchange fees please? Is this the maximum fee the card issuer (say Lloyds) can charge the retailer? Or is it, as I had previously thought, the maximum that the payment processor (say Visa) could charge the card issuer? If it is the latter, it doesn’t really make sense to me why that would factor into the benefits package that could be offered by Lloyds to users of the card. On the other hand though, the retailers I’ve asked have seemed to suggest there’s been no change to card fees and they still pay more than 0.3%… so neither seem to work in my mind! Must be missing something.

    • Mr Dee says:

      Individual card issuers are not going to be able to set their own interchange fees it is going to be the Merchant account providers that charge the retailers

      The Merchant Account Providers should not be charging more than 0.3% to the retailers for accepting a Mastercard consumer card for example. Whether they bump other fees for use of their service is another matter.

      Paypal is also doesn’t adhere to the 0.3%.

    • The interchange fee its just one of the components of the fees that merchants pay when taking cards. The total is typically 1.5-1.75% for credit cards, much less for debit cards + probably a monthly fee or if the trader uses one of the small handheld devices probably 2.5-3% for all cards. The card processors have also, since the cap on interchange fees, added lots of small extra charges, so for the merchants the cap is completely illusory.

      • That money goes to the card processor, eg Streamline, though – not MBNA / Barclaycard etc.

        • Many extras £35 pm for the card machine, £3 pm for PCI compliance, £4 pm for business tracking access.

          Your own bank will charge you 70p per £100 to deposit the transactions into your account after xx days.

          On a turnover of say £100k in cards the retailer will be paying 3% – 4% for the convenience. But cash has a cost as well.

      • the_real_a says:

        You really should be looking at providers like izettle or Stripe who charge circa 1.5% flat across all cards.

  4. Simon Brewster says:

    Thanks Rob, I’d prefer your revised option Y. Do you think Hilton would deny the new card to existing hhonours Barclaycard holders, and would it therefore be a good idea to cancel these cards well in advance of the new card launch? This would then risk losing existing gold status..

    • No, they will – like Virgin – desperately want you to move across, because the alternative is that Barclays tries to persuade existing cardholders to move to a new Barclays product at the time the existing cards are closed.

  5. Adrian says:

    Rob, are they even looking at a USA style big fee card with Diamond status and other perks or are x and y the only options? Any reasons for them not to offer diamond with a fee card, maybe water the benefits down for the UK a little?

  6. Ian M says:

    I just found the survey in my email. My suggestions to them having thought about it a bit more was that option Y was the better of the 2, but that if they want me to continue using the card beyond £20,000 of spend, either offer another free weekend night after every £20,000 of spend, or give a night credit towards status for every say £2,000 of spend

  7. X for us. The properties we ended up in last time were meh because they wouldn’t release standard rooms at aspirational properties for the certificate. The X card would give me and wife 34,000 points plus 20,000 (2,500 extra points first 4 stays) =54,000 + points from stays. Presuming of course the 2,500 bonus points continue.

  8. RussellH says:

    Option X looks vastly more attractive to me. 50% bigger sign up bonus, 25% more on in-house spend. The rest, to me, is irrelevant. Until I started reading this site, I would never have believed that anyone could spend £10K on a credit card in a year, let alone £15K or £20K 🙂
    £1 000 in 3 months is usually doable without manufactured spending.
    I have once managed the £2 000 for a gold Amex, but that was with the help of my partner putting a huge party for her siblings onto her supplementary, and it meant sacrificing a useful number of IHG points too…

    • Peter K says:

      In that case you need to look more into manufactured spend. I will have “spent” £1000’s more than I have earned this year. The problem with MS is that those who have found a way to do it often can’t tell at the risk it will stop for everybody.

      • the real harry1 says:

        Oh, & you can hit your £3000 MSR on day 1! 🙂

      • Mr dee says:

        Problem with manufactured spend is now some of the credit card companies are reporting the amount you paid each month, so if your paying off your annual salary every month you can expect some questions on your next credit card application.

        If you have a real genuine answer ie for business spend then it shouldn’t be a problem.

        • the_real_a says:

          All i will say is that this is not as big a problem as you make out. Many people have net worth which is not reflected in earning. Also reimbursed expenses at very high levels are not unusual in the slightest (and i would be under NDA so couldn’t disclose this). There is the AMEX financial review of course, but sensible people who do MS would diversify over all of the reward credit cards in the market.

    • Winston Leroy says:

      I’ve a friend who pays business expenses that he claims back for his employer of 50k a month. There’s many people on this site easily spending 50k a year.

    • Mr dee says:

      If you can put business spend through then that can easily rack up, however if your limited to just personal spend then this often needs some planning if to maximise returns.

  9. So you’re getting over a 50% rebate on your Hilton stays? I find that very difficult to believe!

    • Marcw says:

      Ok! If you get at least 10 points per USD… at least 50.000 points. If on top you ad Élite bonus… you’re much closer to 80/90k.
      And no, a 3 for 2 is not a 50% “discount”. It’s more like a 30%…

      • Marcw says:

        Sorry, this is absolute bollocks. My fault: sorry (an extra 0, was too good to be true!!!!)

  10. Option Y for me. Shame they got rid of the £750 spend for certificate. This was most appealing in the hotel loyalty card world. Waldorf Astoria Palm Island was meh, they charged me for a bacradi when I didnt even touch the mini bar. Wouldnt go back.

  11. Martin says:

    Do we have any idea who will be managing the cards? Hopefully not Creation and assume not Barclaycard as they have the current one..

    • No idea. I also don’t know who Lufty is looking to work with. My best guess would be that New Day has been persuaded to get into the travel sector.

    • Christian says:

      Urgh, Creation are useless.
      And so slow to process payments – ever heard of Faster Payments if you’re reading this? They’re about 10 years behind the rest of the market.

  12. Nigel Williams says:

    Went through the questionnaire today.

    They really need to make diamond attainable – The goal of these cards is brand loyalty through status more than anything else.

    Points for spending in the hotel itself is pretty useless, as many will be churning limits on other cards (Amex etc) anyway.

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