When I cover miles and points credit cards on Head for Points, there is something which I always try to ram home. In general, miles and points credit cards are not suitable for you if you do not clear your balance every month.
Miles and points cards generally carry steep interest rates. American Express is about to increase the interest rate on purchases on its Starwood Preferred Guest / Marriott Rewards credit card from 19.9% to 22.9% variable for example, and the Nectar and British Airways cards have been at that level for a long time. (The Starwood card has a decent sign-up bonus of 30,000 Marriott / Starwood points – worth at least £150 – but you really should avoid it if you won’t clear your balance each month.)
Quietly, however, the situation has changed.
Two of the top five cheapest low interest rate credit cards on the market now give points.
Using Moneyfacts data, there are five credit cards which currently have a long-term interest rate (as opposed to a short-term promo offer) of under 10%.
Option 1: The Tesco Clubcard low rate credit card (earns Avios or Virgin miles)
This card is free. There are various versions but the one we are looking at is the low rate version – click here – offering a market leading 5.9% APR variable. There is no sign-up bonus.
You would earn 1 Clubcard point for every £8 spent on this card, which converts to Avios (1 Clubcard point = 2.4 Avios) or Virgin Flying Club miles (1 Clubcard point = 2.5 miles). This works out at 0.3 Avios per £1 spent.
Note that Clubcard points are awarded on a ‘per transaction’ basis so you won’t earn anything on individual transactions of £7.99 or less.
Whilst not hugely generous, this is actually the highest Avios earning rate on a free Visa or Mastercard unless you meet the very stiff criteria for getting a HSBC Premier credit card.
If you are looking for a credit card with a low interest rate which also earns miles then this is the option for you.
Options 2-4, ranked by interest rate, do not offer loyalty points:
Bank of Scotland Platinum Low Rate Mastercard (6.4%)
Halifax Flexicard Mastercard (6.4%)
Lloyds Bank Online Platinum Low Rate Mastercard (6.5%)
We then come to …..
Option 5: American Express Rewards Credit Card (earns Membership Rewards points)
There are three versions of this card. You want the low rate option (click here). This comes with a sign-up bonus of 5,000 American Express Membership Rewards points bonus and a representative APR of 9.9% variable.
You will earn 1 Membership Rewards point per £1 you spend. These transfer 1:1 into Avios, Virgin Flying Club or various other airlines. They also transfer into Hilton Honors (1:2), Radisson Rewards (1:3) and Marriott Rewards (2:3). This recently updated article gives my thoughts on the most valuable transfer options for your Amex points.
The sign-up bonus is only available if you have not held a Platinum, Gold or Green American Express card in the last six months. You are OK if you have a BA, SPG, Nectar or similar Amex.
This is not the best American Express starter card and I only recommend it if you a miles and points beginner who also wants a low interest rate card. Everyone else should get Preferred Rewards Gold instead because of the higher bonus and better benefits. The American Express Rewards Credit Card is also interesting if you are planning to cancel a Gold or Platinum card but want to keep your Membership Rewards points. I explain more in this article.
In general, my advice still holds – most miles and points credit cards should be totally avoided if you pay interest.
If you do pay interest on your credit card, however, the options above are the lowest interest rates on the market (as of the date of publication of this article) and two of them will also let your earn points whilst you spend.
Want to earn more points from credit cards? – December 2020 update
If you are looking to apply for a new credit or charge card, here are my December 2020 recommendations based on the current sign-up bonus.
British Airways American Express
5,000 Avios for signing up, no annual and a companion voucher for spending £20,000 Read our full review
British Airways American Express Premium Plus
25,000 Avios and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review
American Express Preferred Rewards Gold
Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review
The Platinum Card from American Express
30,000 points and an unbeatable set of travel benefits – for a fee Read our full review
Virgin Atlantic Reward+ Mastercard
15,000 points bonus and the most generous non-Amex for day to day spending 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:
American Express Business Gold
20,000 points sign-up bonus and free for a year Read our full review
American Express Business Platinum
40,000 points sign-up bonus and a long list of travel benefits Read our full review
British Airways Accelerating Business American Express
Earn both Avios and BA On Business points with your business spending Read our full review
Capital On Tap Business Rewards Visa
The most generous Avios Visa or Mastercard for a limited company Read our full review
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 credit cards 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.