Which low interest rate credit cards also earn points?

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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.

Tesco Mastercard credit card low rate

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.

Conclusion

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 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 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.

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Comments

  1. Not sure 9.9% should be considered low interest given the low Bank rate.

    Even 5.9 is quite high.

    Sure, compared with the higher rates it is cheap, but paying 10% per annum is still a lot if you don’t clear your balance compared with a 0% card.

    • While it shouldn’t be recommended to carry any balance for the points, having a low rate credit card isn’t too bad of an idea for emergencies.

      Means it is possible to finance something short term without applying for more credit for a 0% card or even hire purchase at higher rate.

  2. When I bought my flat and needed to buy loads, I just used my rewards card (BMI in those days) and then did a balance transfer to a zero interest card, which I paid off over time. Probably a better strategy in most instances.

    • +1

    • Is there normally a fee of around 3% for balance transfers? This would cancel out most of the reward you get from the points (unless you have very good uses for the points).

  3. James M says:

    This Amex is worth a mention – 18 months 0% interest free on purchases: https://www.americanexpress.com/uk/credit-cards/rewards-purchases-credit-card/ and earns membership rewards points.

    That being said, whilst stoozing has its benefits, I just can’t be bothered with it.

    • Just about to pay off £13k from my Lloyd’s Amex after over 2 years interest free. As well as 2 upgrade vouchers, about 20k Avios and £300 compo, I’ve also earned well over £1000 in interest on that cash. Well worth stoozing to an interest free card.

    • Combatjohnny says:

      Interesting, i have a wedding to pay for this year and was looking for a 0% card. I dont think ill need to borrow a large amount (getting married in Armenia as its my partners home country) but i was looking to spread the cost. Thanks

  4. Slightly OT but no bits today, I just paid my MBNA card that replaced the Virgin one. This had seen me earning £13 odd of cash back but as it just credited (or should I say debited?) it to the balance it feels so much less exciting than earning miles. Am I the only one to feel this way?

    • I agree, irrational as it seems, there’s something about getting some kind of points currency that makes this game seem worthwhile. Getting a reward that I’m going to spend on something fun is what it’s all about.

      Statement credits are boring too. I mainly use the Amazon credit card for non amex payments as I at least get a £10 Amazon voucher when I have enough points rather than a yearly statment credit

    • Agreed. I just got £230 and felt totally unmoved.

  5. From prior experience it was impossible to Balance transfer from Amex to Virgin Money MasterCard, Tesco MasterCard and a few others. One of the card providers told me my UK issued Amex actually belonged to a South American country and told me they believed I was money laundering!

    In the end I bit the bullet and took a 0% money transfer and negotiated a reduction in the fee based on their inability to do what they had verbally assured me they could do.

    I won’t ever need to balance transfer from an Amex again, however I’d be interested to know if anyone has successfully done this in the last year.

    • johnny_c-l says:

      Barclays can accept BT from Amex, I did this last month.

      • David P says:

        HSBC also accept balance transfers from Amex although their online system isn’t particularly reliable. You occasionally get a clueless customer services operator who tells you that they can’t do it at all, but I’ve done it twice through the customer services route.

    • Thanks – good to know. I couldn’t use Barclays last time as already held the Hilton card, didn’t try HSBC.

  6. OT, I have just received a letter saying I have been refused Gold and Starwood as per information in my credit report. TBH I have probably churned too much over last 2years. I did have a loan that I applied for a year ago for a new car but I ended up taking PCP and never took the loan out.
    Does anyone know how long I should wait to apply again and any tips for getting my credit report back onside with Amex. My Experian score is still 969!
    It was probably not advisable to apply for both cards at the same time via an Amex Plat referral?

    • LOL applying for two cards at once prob didn’t help 😛 It also just shows how meaningless these credit reference agency scores are I’m afraid, each lender makes their own decision. I think no choice but to just give it a bit of time, keep paying off the bills on time then reapply for one card. I’ve closed my BAPP but am giving a few more months as I applied for lots of cards back in the summer and want things to settle down a bit first!

    • James M says:

      Assuming there is no adverse information (i.e. never had any missed or late payments, never exceeded credit limits) you may be able to appeal it – call them and ask for an underwriter or write in to appeal.

      Alternatively wait at least 6 months and try again.

      • Thanks James, I have a BA blue with a 13.5k credit limit that I never use so I’m going to cancel and wait at least 6 months.

        • Oh lol, didn’t realise you had that – in that case they may just feel they’ve already extended the credit they feel able to offer you. If you’re planning on closing that account anyway you could call and see if they’d reassess one of your applications in light of that?

    • My OH just had this issue. He phoned Amex who said he had too much available credit with Amex so was refused the SPG card. He closed one card, reduced the credit limit on another. He applied again a week later and has now been approved for the SPG…..

      • Wally1976 says:

        I reduce all my Amex limits down to £2k and they seem to let me have all the cards I want (and I’m a student at the moment!)

  7. Nicholas says:

    Can you refer someone to get the Amex Reward Credit Card?
    I have an Amex Plat. and wanting to refer someone who’s looking to cancel their Amex Gold, but keep the rewards account open.

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