Airmile credit cards

Earn miles while you spend with an airmiles credit card. Whilst many airlines have loyalty programmes that reward customers for flying frequently with miles, airmile credit cards allow you to earn miles without having to fly at all to get them!

What are airmile credit cards?

Airmile credit cards are a type of reward credit card. Like other reward cards, airmile credit cards reward you for card use. So the rewards you receive, airmiles or points, are directly linked to the amount you spend. The more you spend the farther you can go.

It might surprise you that you can get rewarded for your normal spend since you are essentially getting something for nothing, and in some respects you are. More accurately, though, you are actually using a card to harness the full value of your transactions. In essence, if you’re not using a reward card, you’re leaving money at the checkout every time you spend. In fact, you’re generously gifting your bank or card issuer money every time you shop. Why? Because every time you use a credit card to make a purchase, the merchant has to pay a percentage of the value of the transaction – the interchange fee – to the issuer of your credit card (Barclays, HSBC, etc.) and the credit card processor (Visa, MasterCard, Amex, etc.) 

Back when every credit card payment was manually processed, these interchange fees were used to pay for the armies of people required to check signatures on payment slips. Payment processing is now largely automated, yet the fees associated with payments persist. In some respects, this means that you’re paying a little bit more for every product. However, without the fees, we would not enjoy the convenience, transparency and security that credit cards offer. So, the best you can hope to do, since interchange is not going away anytime soon, is to harness these fees for your benefit in the best way possible – by using a reward credit card like an airmile card.

How do airmile cards work?

Airmile cards are relatively straightforward to understand. Every card is linked to one of the main frequent flyer programs designed to encourage loyalty amongst airline passengers. When you spend on your card you earn points at a predetermined rate and these points can be exchanged, in sufficient quantities, for flights.  

For example, for every £1 spent you might earn 1 airmile. Some airmile credit cards can also offer bonus miles on particular purchases. For example, if you make a travel purchase you might earn 3 points for every £1 spent.

Despite their simplicity, there are still a number of stipulations to be aware of to make sure you get the most appropriate and rewarding card.

Annual fees

First and foremost when picking an airmile card, you’ll have to decide whether you want to pay an annual fee or not. While most credit cards today are free, airmile cards represent one the last annual fee charging cards in the UK market.

Put simply, this is because fee-charging cards can offer a better rate of rewards for your spend. If a free card offers 1 point for every pound spent, a paid card is likely to offer 1.5 points.

If you don’t plan to spend a lot on your airmile credit card, you should probably get a fee-free card. If you are spending a significant amount, then the extra value you gain could outweigh the cost of the annual fee. Sadly, there is no hard and fast rule for determining this, since the cash value of a point is determined by what they are exchanged for, and there is no linear relationship between the cash value of a reward and the number of points used to obtain it. However, if you assume that a point is worth 1 penny, you would need to spend over £40,000 per year for a card charging an annual fee of £200 offering 1.5 points per pound to offer a better return than a free card offering 1 point per pound.

Bonus miles

Bonus miles are offered by airmile card issuers to tempt you into applying. They are usually a fixed number of points, over and above those you earn in the course of your normal spending. This is only if you can spend a set amount within the first three months of holding your card. These points can be very generous, and they further complicate the decision regarding whether you should pay an annual fee or not. 

For instance, let’s return to the previous example and assume the free card offers 5,000 bonus points for spending £3,000 in your first three months of holding a card, whereas the fee charging card offers 20,000 points. Any spend over £10,000 (£3,000 of which in the first three months) will deliver a more cost-efficient rewards outcome when paying the £200 annual fee (assuming a point is worth 1p). Of course, by the second year of holding your card there is no bonus, so you would be better off with the free card – if your average annual spend was around £10,000.

Frequent flyer scheme

Although frequent flyer schemes have consolidated in line with a number of major airline mergers over the past few years, there are still a number of schemes to choose between. Avios cards are perhaps the most well known in the UK, but others exist, and you should ensure that the scheme associated with your card actually flies to destinations that interest you. If you’re just looking to go to New York on a shopping spree, most schemes will be fine. But if you’re looking farther afield, check which airlines fly there and which schemes they are associated with.

Where you shop

Most co-branded airmile cards use American Express as their payment processor because they have historically been able to charge merchants a higher interchange fee than Mastercard or Visa. This is no longer the case, and co-branded Amex cards are now governed by the same EU directive that caps the interchange fee at 0.3%. 

However, Amex’s dominance of the airmile card category persists, as does the number of merchants who will not accept their cards. The introduction of caps on co-branded Amex cards might increase their acceptance levels in the UK – or they might just push consumers towards cards like American Express Platinum that aren’t subject to the 0.3% interchange fee cap. In the meantime, if you usually shop in places that don’t accept American Express, then an airmile card might not be right for you.

Interest rates

Airmile cards only really benefit you when they are free, or at least cost-neutral (the rewards balance out any fees). If you don’t clear your balance in full every month, though, one or two high-interest payments will wipe out the value of any rewards you might receive.

You can minimise your charges by selecting a card with a lower interest rate, but any interest whatsoever is likely to negate the value of the product. If you are in this position, then a 0% purchase card is likely to be a more appropriate product – especially since some also offer reward points that can be exchanged for airmiles.

Airmile credit card FAQ

Can I still get an airmile card with a bad credit score?

It is unlikely. Reward cards such as airmile cards require a very good to excellent credit rating*. Perhaps more suitable for you would be a credit building credit card which would improve your credit over time, and within 6-12 months you should be in a better position to apply for a more rewarding card.

*Due to coronavirus financial worries, some lenders have tightened their acceptance criteria. It’s certainly worth doing an eligibility checker before applying.

Should I opt for a free card, or one that charges a fee but offers a better airmile deal?

This will all depend on how much you spend on your card over an average period, and whether the value of any redeemable points will exceed any fee payable, compared to the same spend and reward with no fee. Most airmile cards offer an introductory bonus, which is almost exclusively dependent on reaching a minimum spend, so this would be an important factor in your calculations. However, you should remember that introductory bonuses are only offered once, so calculate for the long term. You should not be left with a card that costs more to maintain than you can redeem for flights or other travel-related benefits.

Do I only get airmiles when I fly?

No. Frequent flyer points work like that, but airmile cards are different. With airmile cards, you earn points with all your credit card spend, and these points can then be redeemed for flights, upgrades, or other travel-related discounts or benefits.

Is there any way I can boost my airmiles?

Yes. You can add a supplementary cardholder to your account so that you both earn airmiles. However, you should bear in mind that any debt accrued by the other cardholder is yours, so pick your airmiles partner very carefully!

Another way to help accrue airmiles more quickly is to use your airmile card for everyday spending. It’s also worth investigating your supermarket loyalty points, if you have any, as some of these can be redeemed for airmile points too. Whatever your tactic, remember to pay your credit card bill off in full every month (without fail!), or any rewards will be quickly wiped out by interest payments.

How many credit card airmiles do I need for a free flight?

The value of your airmiles will largely depend on what programme you are earning with. For example, some cards might offer miles worth £0.01 each, so you would need 20,000 miles for a £200 flight, 30,000 miles for a £300 flight, 40,000 miles for a £400 flight, and so on.

Some airlines will have redemption options based on how far you’re flying while others redeem your points based on the price of the flight.

It’s worth bearing in mind that you might need anywhere from 12,000 to 40,000 miles for a flight.

Can I use my airmile card abroad?

Yes. An airmile card, like any other credit card, can be used abroad. However, it might not make financial sense to do so. You should check the fees that your particular card imposes on foreign transactions and on foreign ATM withdrawals. It may be savvier to look for a separate dedicated travel credit card, some of which offer fee-free foreign transactions and cash withdrawals. Similarly, you could check out the range of prepaid travel cards, which can offer favourable exchange rates and free use abroad.

18th May 2020