How the Nectar and Avios tie-up will change how you earn and spend points

This is Part 2 of our initial response to the news that Sainsbury’s is the new Avios supermarket partner and that Nectar points and Avios will become interchangeable.

Please don’t read this article before you have read Part 1 of our Sainsbury’s / Avios / Nectar coverage which is here. You’ll just get confused!

What is the Nectar to Avios exchange rate?

As a reminder, from Monday, you will be able to convert your points online like this:

• 250 Avios = 400 Nectar points

• 400 Nectar points = 250 Avios

Since 1 Nectar point is worth 0.5p at Sainsbury’s, Argos, eBay and other partners, what we are saying is that 250 Avios = £2, so 1 Avios = 0.8p.

This exchange rate is VERY attractive for Avios collectors

What I am intrigued to discover about this new partnership in the coming months is which way, overall, most points will move. Will Avios see a net inflow or a net outflow?

Will there be a net transfer of points into Avios from Nectar? Based on 400 Nectar points (£2) = 250 Avios, you are ‘buying’ Avios for 0.8p each. This is a decent deal.

If you have any Nectar points and you are serious about Avios, it makes sense to convert them rather than spend them with any other Nectar partner. It is difficult to pick up Avios for less than 0.8p.

On the other hand, will there be a net transfer of points from Avios into Nectar?

1 Avios now get you 0.8p of Sainsbury’s, Argos or eBay credit, amongst other partners.

A lot of Avios collectors – not necessarily HfP readers, who are savvier than the rest – will see value in moving their points across.

There are also likely to be a lot of Avios collectors who don’t see themselves flying anywhere for some time, or are in financial difficulty, and like the idea of cashing out for 0.8p.

Does this new deal undermine almost all of BA’s non-flight Avios redemptions?

Er, yes. This is where I get a bit confused about the grand plan.

If you use your Avios for:

• hotel redemptions
• car hire redemptions
• wine from Laithwaite’s
• ‘experiences’
• seat selection fees or
• ‘Part Pay With Avios’

….. you get around 0.5p to 0.6p per Avios.

You would be crazy to redeem Avios for any of the things above, at 0.5p to 0.6p per point, when you could get 0.8p per point of pseudo-cash by converting to Nectar.

The whole ‘Part Pay With Avios’ strategy is now looking very messy.

Even some Avios flight redemptions don’t get you 0.8p

I have a spreadsheet of the last 7.7 million Avios I redeemed, from 2013 to today. I got – based on my personal value of the flights I took – an average of 1.2p per Avios.

Many people do far better than me, because I do a lot of Gold Priority Rewards for double Avios, and don’t always use a 2-4-1 BA Amex companion voucher.

A lot of people, probably not HfP readers, will do worse than me. As we have shown numerous times, redeeming for Economy flights can often mean getting 0.8p or worse per Avios. The only saving grace is flexibility, since Avios tickets can be refunded.

For these people, transferring Avios to Nectar is a better choice than redeeming for Economy flights.

How does this change your credit card strategy?

Here is an example of how the convertibility between Nectar and Avios changes things.

American Express has a Nectar American Express card. See here, and read our Nectar Amex review here.

It works like this:

• no fee for Year 1, £25 thereafter
• 20,000 Nectar points (so 12,500 Avios) sign-up bonus
• 2 Nectar points per £1 spent (so 1.25 Avios)

This card is now attractive. For the first year, it is a better deal than the free British Airways American Express card, which only earns 1 Avios per £1 spent and comes with a sign-up bonus of 5,000 Avios.

After Year 1, anyone spending over £10,000 on the free British Airways Amex may be better off with the Nectar Amex and its higher earning rate.

On the other hand …..

There are bound to be many people who are currently paying £25 per year for the Nectar American Express card. If they are spending under £10,000 per year on the card, they should cancel it and get a free British Airways American Express instead, converting the Avios to Nectar.

Here’s another quirk:

You can redeem American Express Membership Rewards points for Nectar points, at the transfer rate of 1:1.

This is now useless. You should transfer from Amex to Avios instead, at the transfer rate of 1:1, and then transfer your Avios to Nectar. This gets you a Membership Rewards to Nectar transfer rate of 1:1.6.

This means that you can turn your Membership Rewards points into pseudo-cash, spendable mainly at Sainsbury’s, eBay or Argos, for 0.8p per point. A lot of people will find this attractive.

Any special Nectar redemption deal could encourage you to wipe out your Avios balance

In the PS. to Part 1, I showed you how the best use of Avios – bar none – is now redeeming 219 Avios (350 Nectar points) for any hot or iced drink, any size, at Caffe Nero.

At £3.30 for a Caramel Latte, for example, you are getting 1.51p per Avios.

More seriously, we have seen occasional offers in the past where eBay lets you redeem your Nectar points for twice the usual value – 1p per Nectar point.

If eBay did this again, you would get 1.6p per Avios if you turned them into eBay credit. A lot of Avios collectors would hit the ‘redeem’ button at that point.

It would trigger other moves too. I would be rushing to empty my American Express Membership Rewards points into Avios if I could get 1.6p per point at eBay. There isn’t much, at the end of the day, that you can’t buy on eBay – and these days most of it is brand new.

Sainsbury’s also runs an annual ‘double up’ promotion. This allows you to get 1p per Nectar point when you buy products in certain categories, up to a limit of 10,000 Nectar points (£100) per account.

It would make a huge amount of sense to convert 6,250 Avios into 10,000 Nectar points to get £100 to spend in Sainsbury’s during ‘Double Up’.

There is a lot more to come

We have just scratched the surface here. Sainsbury’s Bank issues a range of Mastercard credit cards, for example. The sign-up offers can be generous and there is no annual fee.

Esso is a Nectar partner, so there is a new route to earning Avios from petrol. Sainsbury’s Energy often has ‘big bonus’ sign-up deals if you switch your fuel over.

We will cover all this over the coming weeks. In the short term, please don’t redeem any Avios for hotels, car hire, wine, seat selection or ‘Part Pay With Avios’, because transferring them to Nectar on Monday will get you 50% more value.

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How to earn Avios from UK credit cards (April 2024)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

There are two official British Airways American Express cards with attractive sign-up bonuses:

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points. These points convert at 1:1 into Avios.

Run your own business?

We recommend Capital on Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, along with a sign-up bonus worth 10,500 Avios.

SPECIAL OFFER: Until 12th May 2024, the Capital on Tap Business Rewards Visa card is offering a bonus of 30,000 points, convertible into 30,000 Avios. You must have a Limited Company to apply. Click here to learn more and click here to apply.

You should also consider the British Airways Accelerating Business credit card. This is open to sole traders as well as limited companies and has a 30,000 Avios sign-up bonus.

There are also generous bonuses on the two American Express Business cards, with the points converting at 1:1 into Avios. These cards are open to sole traders as well as limited companies.

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.