Comment: Airmiles Credit Cards - What’s the Deal?

While we’ve been redressing our credit card pages here at Which4U, it’s been interesting to note that certain types of credit card are now drawing attention because of their fall in popularity. Let’s take the case with air-miles cards.

Frequent flyer programmes were began through American Airlines in the early 1980s and sparked a huge wave of interest all over the world.

The opportunity for free travel caught the public imagination and air-miles became a hugely popular reward currency for all sorts of commercial and transactional activity. Consumers chose their credit cards to collect air-miles, they shopped at supermarkets that offered air-miles, and they switched insurance and utility bills to providers that offered air-miles.

Thirty years on, we now have a booming budget airline industry, and there’s a lingering question over whether the love affair with air-miles is finally over in the UK. Last November, flagship carrier British Airways made the controversial decision to integrate its air-miles programme with an existing frequent flyer mile programme and revert to its Avios points system.

Irate air-miles collectors now face the prospect of paying charges, fees and taxes for their flights (or a flat fee with the BA ‘Reward Flight Saver’ option).

The versatility of Avios is appealing - points can be spent in all sorts of ways. It's more taxing, though, iwhen it comes to redeeming points through flights. There are different tariffs for the four different flight class categories with British Airways, and payment can develop into a negotation between cash and points.

Experts suggest that this kind of currency transposition disguises air-mile inflation, making the miles worth less than in previous years. More is now needed for the same distance, they have suggested, and the ‘cashless’ exchange – free flights – is now a thing of the past.

Ian Romanis, the Head of Loyalty at British Airways, disagrees that customers are worse off as a result of the changes, and argues that the new system offers a better deal than before.

"I don’t believe that over a period of time that that currency has been devalued. We’ve offered our customers more opportunities to collect and redeem and more flexibility and options in doing it", he told the BBC. He cited BA flights, air-partner flights, upgrades, hotels and car-hire amongst the available options for redemption.

It's also possible that the availability of cheap flights has eroded the novelty of airline travel or redressed the real value we place on air travel. The squeeze in living standards over recent years is likely to make many think carefully about spending vast sums, whether in cash or in long, hard-earned reward currencies.

But amid the ever-diversifying list of available redemption options, travel journalist Simon Calder suggests that an upgrade on a long-haul flight might prove the best value.

"Suddenly you find you’ve paid economy and got business class - a great feeling", he noted, "and probably the most efficient way of squeezing value out of your frequent flyer points".

How do Which4U’s air-miles credit cards shape up?

Lloyds TSB's Airmiles Duo card offers an online bonus of 2,000 Avios points for applications before 1st March if £500 is spent in the first 3 months, and 150 bonus airlines for every £1,000 consolidated in a balance transfer.

British Airways’ American Express card tops Lloyds TSB's introductory offer, with 3,000 Avios points for a £500 spend in each of the first 3 months.

Thereafter, it’s 1 Avios mile for every £1 spent on these cards, though Lloyds' card offers double points for spending abroad. Given that Britons spend around £10 billion per year on cards overseas, that may be a bonus that pays some dividends.

A one-way European trip from London to Paris, Geneva, or Bruges (4,500 Avios) looks easily achievable over the course of a calendar year. A return trip, of course, would be even better.

The Virgin Atlantic Amex credit card is offering 3,000 bonus miles with the first purchase, and loyalty rewards. Card holders receive a 10% discount on Virgin Holidays, and earn 2 club miles for every £1 spent on with Virgin air travel (1 club mile for all everyday spending).

With the average household bills creeping towards £20,000 each year, a switch to this credit card might see a trip from London to New York (14,750 single) come around sooner than expected.

Virgin also offers a flight upgrade option if £10,000 is spent on the card in one year, or a complimentary reward flight for a companion if £15,000 is spent in a year. This is a card that requires serious spending, but there are signs of rewards for the privilege.

The serious benefits come, however, with British Airways' Premium Plus credit card, which comes with a £150 annual fee and an eye-watering 50% APR. It's not a card to harvest a sizeable balance, but it will offer 18,000 Avios points in return for £3,000 of spending in the first three months. That’s two return trips to popular European cities, or one return trip to popular Mediterranean destinations such as Barcelona or Rome with points to spare. Like the Virgin Card, a £10,000+ annual spend earns you a flight companion ticket.

For years, air-miles have been the basis of ambitious long-term reward programmes for spenders eager to travel to new continents. Now it may seem a much riskier long-term prospect.

Occasional economy-class flyers are unlikely to see any need to benefit from such credit cards. But those who anticipate spending several thousand on their credit cards across a short period of time might just consider the bigger rewards on offer with airmiles credit cards, which are certainly no less valuable than other forms of reward credit card on the market.

Keith McDonald
Which4U Editor