Hot Tip: Credit cards with benefits

There are many reward credit cards on the market at the moment, and I thought I would highlight a couple that may interest you.

Important note: We are not advocating anyone runs out and gets a credit card, especially if you don’t have one already.    The ABSOLUTE rule with any reward cards is that you have to pay off your balance entirely every month.   The interest rates are so high on these cards that if you start paying interest, the value of any reward benefit you may gain is completely wiped out by the interest payments.  If you need a credit card where you maintain a balance, these definitely are not the cheapest option.

For flights, American Express run two cards, British Airways and Virgin Atlantic.  Which card you look at primarily depends on where you intend to travel, and the quality of experience you are after.  A quick look at the reward calculators and BA appear to have many more destinations, making the card more flexible for travellers.   But if you have a single destination in mind, the VA card may be worth a look.  Both cards come in two versions, a fee free version and one with an annual fee.  This fee currently ranges from £140 to £195 / year.  And this is where it gets a little complex and you need to get the calculator out to see which is going to work for you.

On both cards you accumulate miles, flying club with VA or Avios with BA.  The fee free rates are both 1 mile per pound spent, while the fee paid cards have a high rate – VA is 2 miles / £, while BA is only 1.5 miles /£.

The advantages start to click in with higher spend rates.  Pay for everything on your card instead of for instance using your bog standard debit card, which has no reward incentive, and you soon clock up the miles.

Both VA and BA offer a range of rewards, which you can pay completely in miles, or pay with miles and cash.  At first glance, VA rewards cost less in miles, so could be the best option.  Both cards also give you the chance to earn a complimentary companion ticket, but here’s where the sums get complex.  BA give you a free flight if you spend more than £10,000 a year, but VA need you to spend £15,000 PLUS buy at least one full fare flight to qualify.  Get your calculator out.

I could try to give you an example but I’ve been on the Peroni so I will save that for another post.

On both airlines you have to pay taxes and “fees”, although BA again do a saver fare on selected dates and routes where you pay a fixed nominal sum of something like £35-£50/person.

But as an example in our first year with BA Amex we clocked up enough miles plus the complimentary ticket to get two tickets to Mexico. Taxes and fees were around £300 each.  With standard fares at the time over £700 each, we saved £800 on fares. Deduct the annual fee of £150 (it has gone up to £195 this year) and we are still over £600 better off. That’s paid for our next holiday.

Remember this only works if you pay off your card each month and pay no interest.

I’ve never flown Virgin Atlantic and although the cabins appear more glamorous in the TV ads, we are happy with BA as we travel to Europe at a lot which makes BA the better option, but I will be checking our own sums to see which is the best value for money.

 

Coming up – Flybe and IHG credit cards…

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