When is it worth paying an annual fee for a miles and points credit card?
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I get numerous emails from Head for Points readers asking for advice on which miles and points credit card they should get. These often come with the caveat “but I don’t want to pay a fee for a card”.
I don’t agree with this approach. Let me explain why.
Most credit cards in the UK do not carry an annual fee. It is very likely, before you became interested in miles and points, that you had never paid a fee for a credit card in your life.
I can see why you wouldn’t want to.
You know that the card company gets a cut from the retailer every time you buy something. You know that they add a 3% foreign exchange fee whenever you spend abroad, and whenever you end up withdrawing some cash on it (which, however much you try to avoid it, always happens once or twice a year). You may accidentally miss a payment date occasionally and run up some interest.
Paying for the privilege of generating this revenue for the credit card company seems wrong.
I think you need to look at it differently. Forget that you are paying for a credit card. Look at it as simply paying for the benefits offered.
Taking the British Airways Premium Plus card as an example
Some people take one look at the £195 annual fee on the British Airways American Express Premium Plus credit card and are put off instantly.
Purely from the point of view of the sign-up bonus, being put off by the fee is a mistake. The card is currently offering 25,000 Avios for signing up when you spend £3,000 within 90 days. The majority of Head for Points readers would jump at the chance of buying 25,000 Avios for £195 which is basically what you are doing.
The fee becomes even more realistic when you look at the 2-4-1 voucher:
Would you pay £195 to buy a voucher which allowed you to get two Avios redemptions (BA planes only) for the miles of one? This would save you 180,000 Avios on two Club World tickets to Tokyo for example.
This is clearly a ‘no brainer’ for anyone who understands the value of Avios. 180,000 Avios are worth at least £1,800 if used sensibly. More importantly, if you wouldn’t otherwise be able to earn enough Avios for two Club World tickets to Tokyo, it lets you undertake a trip that would otherwise be impossible.
You need to spend £10,000 to trigger the voucher each year, of course, but you need to channel your credit card spend somewhere anyway. The £195 fee also lets you earn 50% more Avios on every purchase – 1.5 per £1 – compared to the free British Airways American Express card and you get a 2-4-1 voucher valid for two years rather than one year.
And some other examples …..
Here are some other examples where, if you treat the fee as paying for a benefits package, it makes sense:
Would you pay £160 per year for the right to upgrade two Virgin Atlantic economy redemptions to premium economy, or from premium economy to Upper Class, or to get a 2-4-1 voucher on economy or premium economy redemptions? Especially if you also got 15,000 Virgin Flying Club miles in the first year for signing up?
When you put it like that, the Virgin Reward+ Mastercard looks good value (you need to spend £10,000 to trigger the two vouchers). That’s before you factor in the excellent ‘1.5 miles per £1’ earning rate.
Would you pay £575 per year to get travel insurance for your family and five other nominated people under 70 years old, car hire insurance, Hilton Gold, Marriott Gold, Radisson Rewards Gold, Melia Gold, Eurostar lounge access, Delta lounge access, two Priority Pass cards each admitting two people for free to 1000 airport lounges, and exclusive benefits at luxury hotels including guaranteed 4pm check-out? Especially if you got 30,000 Avios or other miles in your first year?
This is clearly more of a ‘heavy hitters’ package, but the American Express Platinum charge card will give you all of the above.
Not all credit cards justify their fee …..
I don’t want to suggest that all fee-bearing miles and points cards justify the annual fee.
American Express Preferred Rewards Gold is harder to justify after the free first year. You are paying £140 from year 2, with the main benefit being two free airport lounge passes. It might work if you spend £15,000 to trigger the annual bonus of 10,000 Membership Rewards Points, but I would consider it marginal.
The Lufthansa Miles & More card has a £79 fee – although you currently cannot apply until Summer 2021. For the first year it is worth it for the 5,000 miles sign-up bonus. After that, even the strong earning rate of 1.25 miles per £1 doesn’t justify the fee unless you are spending probably £15,000+ per year. For many people the only reason for paying £79 is that having this card, and using it once per month, stops your Miles & More miles expiring. It is a painful fee to keep your miles alive.
The Marriott Bonvoy American Express card has a £75 fee. Similarly, for the first year it is worth it for the 20,000 Marriott Bonvoy points sign-up bonus. Earning just 2 Marriott Bonvoy points per £1, you need to a big spender to justify £75 for Year 2+. The real value here is the 15 elite night credits you get each year – most people treat it as a cheap way of getting a head start on status renewal.
These three examples show that not all fee-based cards necessarily offer long-term value. However, if you can get your head around the concept of paying an annual fee, you will find that many miles and points card do offer value for money.
Learn more about the credit cards mentioned above
Here is the legally required interest rate information on the credit cards mentioned above, together with links to our detailed reviews:
Sign-up bonus and earnings rate:
- Get 20,000 Membership Rewards points when you spend £3,000 within 90 days
- Earn 1 Membership Rewards point per £1 spent
- Get a 10,000 points bonus if you spend £15,000 in a card year
- Earn double points on all airline and overseas spend
- Points transfer at 1:1 into Avios, Virgin and other airline schemes
Other information:
- Amex Gold is our recommended ‘first card’ for a miles and points beginner
- Get two free airport lounge passes when you sign up, and a further two each year
- After your two free passes, you can visit further lounges for a small fee
- You receive £120 of Deliveroo credit each year (24 x £5 credits)
- Annual fee: Free for the first year, £140 from Year 2
Representative 59.9% APR variable. Annual fee applies after the first year.
You will receive 20,000 American Express Membership Rewards points as a sign-up bonus on the American Express Preferred Rewards Gold card if you spend £3,000 within 90 days of signing up.
Membership Rewards points are hugely flexible, which is why we recommend this as the best choice for your first miles and points card. You can transfer them into Avios, Virgin Flying Club or other airlines (at 1:1) or into various hotels schemes, into Club Eurostar or use them for shopping vouchers.
To qualify for the bonus, you must NOT, currently or in the previous 24 months, have held any other personal American Express card.
You are OK if you had a supplementary card on someone else’s American Express account.
You are OK if, currently or in the previous 24 months, you have held a Business American Express card.
For clarity, you can still apply for the American Express Preferred Rewards Gold card even if you do not qualify for the bonus. You would still benefit from the two free airport lounge passes and the ‘no fee in Year 1’ offer.
American Express Preferred Rewards Gold comes with two free airport lounge passes. These allow either you and a friend, or yourself twice, to visit any lounge in the Priority Pass network. You make additional lounge visits for £20 per person. You receive an additional two free passes each year.
You earn double Membership Rewards points on all airline spend (made directly on an airline website) and all spend made outside the UK.
If you spend over £15,000 in a card year, you will receive an additional 10,000 Membership Rewards points when you renew.
Starting in May 2021, you receive £120 of Deliveroo credit each year. Amex will repay you £5 for the first two Deliveroo orders charged to your Gold card each month.
Other benefits include a 10% discount on Hertz car rentals and special deals at 350 selected hotels worldwide, where Preferred Rewards Gold cardholders receive a $75 in-hotel credit per stay.
Sign-up bonus and earnings rate:
- Get 30,000 Membership Rewards points when you spend £4,000 within three months
- Earn 1 Membership Rewards point per £1 spent
- Points transfer at 1:1 into Avios, Virgin and other airline and hotel schemes
Other information:
- Two Priority Pass cards, each allowing two people into 1,300 airport lounges
- Elite status in four major hotel loyalty programmes
- Comprehensive travel insurance
- Annual fee: £575
This is a charge card, not a credit card. You must clear your balance in full each month. Annual fee £575.
You will receive 30,000 American Express Membership Rewards points as a sign-up bonus on The Platinum Card if you spend £4,000 within three months of signing up.
Membership Rewards points are hugely flexible. You can transfer them into Avios, Virgin Flying Club or other airlines (at 1:1) or into various hotels schemes, into Club Eurostar or use them for shopping vouchers.
This is the ONLY personal American Express card where you still qualify for the bonus if you already hold a British Airways American Express card.
To qualify for the bonus, you must NOT, currently or in the previous 24 months, have held any other personal American Express card which earns Membership Rewards points. This includes The Platinum Card and Preferred Rewards Gold.
You are OK if you had a supplementary card on someone else’s American Express account.
You are OK if, currently or in the previous 24 months, you have held any other American Express card, including the British Airways, Marriott and Nectar cards.
If you cancel The Platinum Card at any point, you will receive a pro-rata refund of your membership fee. You will not lose your sign-up bonus.
For clarity, you can still apply for The Platinum Card even if you do not qualify for the bonus. You would still benefit from the long list of other benefits.
The Platinum Card from American Express comes with an unrivalled list of benefits for the keen traveller.
Your personal travel patterns will determine which of these is the most valuable. The key benefits are:
Full comprehensive travel insurance for you, your family and the family of up to five supplementary cardholders, subject to enrolment
Two Priority Pass cards, each of which allows the holder and a guest unlimited free access to 1,300 airport lounges
Elite status in four major hotel loyalty schemes: Marriott Bonvoy (Gold), Hilton Honors (Gold), Radisson Rewards (Gold), MeliaRewards (Gold)
Access to Eurostar lounges, irrespective of travel class
£10 per month of Addison Lee taxi credit
Sign-up bonus and earnings rate:
- Get 25,000 Avios when you spend £3,000 within 90 days
- Earn 1.5 Avios per £1 spent
- Earn 3 Avios per £1 spent with British Airways and BA Holidays
Other information:
- Receive a companion voucher, letting you book two flights for the Avios of one, when you spend £10,000 in a card year
- The voucher is valid for flights in any cabin
- Annual fee: £250
Representative 101.1% APR variable based on an assumed £1,200 credit limit and £250 annual fee. Interest rate on purchases 24.5% APR variable.
You will receive 25,000 Avios as a sign-up bonus on the British Airways American Express Premium Plus card if you spend £3,000 within 90 days of signing up.
To qualify for the bonus, you must not have held the British Airways Premium Plus or the free British Airways American Express cards in the previous 24 months.
You are OK if you had a supplementary card on someone else’s British Airways American Express account.
You are OK if, currently or in the previous 24 months, you have held any other American Express card.
For clarity, you can still apply for the British Airways Premium Plus card even if you do not qualify for the bonus. You would still benefit from the companion voucher and all of the other card benefits.
When you spend £10,000 on the British Airways American Express Premium Plus card, you receive a companion voucher entitling you to book two Avios redemption flights for the miles of one. This voucher is valid for two years. (Full taxes and charges need to be paid on both tickets.)
This voucher is the most valuable perk available in the UK airline and hotel credit card sector in my view. It could save you 150,000 or more Avios when used for a long-haul redemption in a premium cabin.
The voucher with the Premium Plus card is far more powerful than the voucher given with the free British Airways American Express card. You only need to spend £10,000, instead of £20,000, in a card year to receive it. More importantly, the Premium Plus voucher is valid for two years and is valid in ALL cabins. The voucher on the free British Airways American Express card is only valid for one year and can only be used for Economy flights.
You receive your voucher within a few days of reaching the spending target. You need to fly the outbound leg of your 2-4-1 flight before the expiry date of the voucher.
Sign-up bonus and earnings rate:
- Get 15,000 Virgin Points when you spend £3,000 within 90 days
- Earn 1.5 Virgin Points per £1 spent
- Earn 3 points per £1 spent with Virgin Atlantic
- Highest return per £1 of any UK Visa or Mastercard
Other information:
- Get a ‘2 for 1’ voucher, valid on cash or points tickets, when you spend £10,000 in a year
- Alternatively, claim an upgrade voucher or Clubhouse lounge passes
- Get free access to Virgin Money lounges across the UK
- Annual fee: £160
Representative 63.9% APR variable based on an assumed £1,200 credit limit and £160 annual fee. Interest rate on purchases 22.9% APR variable.
You receive a bonus of 15,000 Virgin Points with your first purchase.
There are no restrictions on earning the bonus if you are accepted. However, you cannot apply for a card if you currently have, or in the previous six months have had, a Virgin Atlantic credit card.
All Virgin Atlantic credit card holders receive free access to Virgin Money lounges across the UK.
When you spend £10,000 per year on the Virgin Atlantic Reward+ Mastercard, you can choose a benefit. This is what you can pick from:
A 2-4-1 voucher, valid for two years, for a Virgin Atlantic cash flight or Virgin Flying Club redemption, in Upper Class, Premium or Economy
A return upgrade – on either a cash or points ticket – from Premium to Upper Class, or from Economy Delight/Classic to Premium. You can either upgrade 1 x return flight if travelling alone or 2 x one-way legs of two return flights if travelling with someone else.
A Virgin Clubhouse lounge pass (requires a same-day Virgin Atlantic, Delta, KLM or Air France flight)
Here’s the small print:
If you are a Red (no status) member, you need to pay 50% of the points for your 2nd ticket if you redeem your 2-4-1 voucher in Upper Class. This means that, for Upper Class redemptions for Red members, it is effectively a ‘2 for 1.5’ voucher. For Economy or Premium redemptions, it is a genuine ‘2 for 1’.
If you are a Gold member, you would receive two Clubhouse lounge passes instead on one if you chose that option
Taxes and charges need to be paid on the ‘free’ ticket as part of your 2-4-1 booking
Vouchers are valid for two years and you must fly the outbound leg of your trip before the expiry date
Sign-up bonus and earnings rate:
- Get 20,000 Marriott Bonvoy points when you spend £3,000 within 90 days
- Earn 2 Marriott Bonvoy points per £1 spent
- Earn 6 points per £1 spent at Marriott hotels
- Points convert at 3:1 into Avios or other airline miles
Other information:
- 15 elite night credits per year to help you towards higher status
- Free night, up to 25,000 points, when you spend £25,000 per year.
- Upgrade to Gold Elite status when you spend £15,000 in a card year
- Annual fee: £75
Representative 41.6% APR variable based on an assumed £1,200 credit limit and £75 annual fee. Interest rate on purchases 24.5% APR variable.
You will receive 20,000 points as a sign-up bonus on the Marriott Bonvoy American Express card if you spend £3,000 within 90 days of signing up.
To qualify for the bonus, you must NOT, currently or in the previous 24 months, have held any other personal American Express card.
You are OK if you had a supplementary card on someone else’s American Express account.
You are OK if, currently or in the previous 24 months, you have held a Business American Express card.
For clarity, you can still apply for the Marriott Bonvoy American Express card even if you do not qualify for the bonus. You would still benefit from the 15 elite night credits per year, the free night (up to 25,000 points) for spending £25,000 and Gold Elite status for spending £15,000.
You will receive 15 elite night credits per year in Marriott Bonvoy. The first batch will arrive within 60 days on applying and then in Spring in each subsequent year.
15 elite nights will automatically get you Silver Elite status in Marriott Bonvoy and put you nearer to Gold Elite and higher tiers.
If you spend £15,000 per card year, you will be upgraded to Gold Elite status in Marriott Bonvoy.
If you spend £25,000 per card year, you will receive a free night voucher, valid at any hotel where reward nights cost up to 25,000 points.
Want to earn more points from credit cards? – December 2021 update
If you are looking to apply for a new credit or charge card, here are our November 2021 recommendations based on the current sign-up bonus.
You can see our full directory of all UK cards which earn airline or hotel points here. Here are the top current deals:
British Airways American Express
5,000 Avios for signing up, no annual fee and an Economy 2-4-1 voucher for spending ….. 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
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 offers.
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
30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios 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
For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending:
Barclaycard Select Cashback Credit Card
1% cashback and no annual fee Read our full review
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