American Express British Airways Avios cards at risk

American Express has lost a crucial legal appeal which could put some of its most popular rewards cards in jeopardy, including its British Airways credit card.

The European Court of Justice made its final ruling last week on whether’s Amex’s co-branded rewards cards fall under the same interchange fee cap that forced many credit card providers to pull, or scale back, their rewards schemes in 2015.

The cap limits the amount companies can charge shops and merchants to process a transaction at 0.3 per cent, putting a squeeze on potential profits which many claimed was how the company paid for lucrative rewards or cashback.

Santorini: One of many destinations American Express credit card customers could reach using accrued Avios points

The ruling affects all cards Amex offers in partnership with other brands; the British Airways, Starwood, Nectar, Costco and Harrods cards in its range. 

Nothing will change in the short run, according to Amex, and new customers can still sign up for all of its cards online.

Robert Glick, vice president at American Express, says: ‘We’ve been preparing for the ruling. Our BA American Express cards, including the fee-free card, remain an integral part of our product portfolio.

‘We’re committed to continuing to offer best-in-class products and services that deliver real value for customers. We are not making any changes to our BA card member benefits at this time.’

However Rob Burgess, of Britain’s biggest frequent flyer website Head for Points, warns some cards, including the free British Airways American Express card, may not stick around in the long run.

He explains: ‘It doesn’t take a genius to realise that the free British Airways American Express is a dead duck long-term with the 0.3 per cent cap on interchange fees, given that Amex will be paying BA something close to 1p per Avios for the points.’

According to Burgess, until the cap hit other providers in 2015, it was normal for credit card providers to charge merchants around 0.75 per cent or more on interchange fees. 

The loss for Amex as a result of having to apply a 0.3 per cent cap is likely to hit the profitability of these cards considerably. 

Burgess adds: ‘Interest income, interchange and FX fees from foreign usage are unlikely to fill the gap, especially with 2-4-1 vouchers to fund as well.

‘Given that the BA Amex cards have billings of over £1billion per month, however, it is a problem that both BA and Amex will need to solve before the current contract expires.’

Is it still worth signing up while you can?

The American Express British Airways credit cards are a popular option, particularly for the free companion vouchers which effectively double the value of your points.

Burgess says: ‘It is certainly still worth people signing up for the free BA Amex, or indeed any other Amex with a good bonus, whilst they can. 

‘I imagine Amex is forced to run the cards until the end of their current contract but any new deal will not be as generous.’ 

If you are looking for a card that is more secure long term, Burgess thinks the cards with a higher annual fee may be a better option.   

He says: ‘The British Airways Premium Plus card, with its £195 fee, looks secure. I can see how the economics of that card continue to make sense in a world of 0.3 per cent merchant fees.’

So it still could be worth signing up for this card particularly if you clock up frequent flyer miles from regular trips abroad on business. 

Signing up gets you 25,000 bonus Avios once you spend £3,000 within the first three months.

The real bonus is a free companion voucher after a £10,000 spend. Swiping the card gets you 1.5 Avios for every £1 you spend or double when spend on British Airways flights or holidays.  

Avios: British Airways has one of the most popular frequent flyer schemes

Avios: British Airways has one of the most popular frequent flyer schemes

The Preferred Rewards Gold American Express card could also be a good option for airline rewards offering a bumper 55,000 points in the first year if you spend £1,250 per month on the card.

This includes a 20,000 bonus for spending £2,000 in your first three months, an extra 10,000 bonus after a £15,000 annual spend on top of the one point for every £1 spend on the card. 

You can swap these points for the same value to airline reward schemes including BA Avios, Virgin Flying Club and Emirates Skywards.

Trading in 55,000 Avios would be enough for a return trip to the Maldives or two return tickets to Santorini.

The card does cost £140 per year (free for the first year). It is also a charge card rather than a credit card, so you will have to pay the money off at the end of each month, but you should always do this anyway with any rewards credit card.  

Which Amex cards are most at risk?

The cards with lower annual fees, or those without annual charges at all may become less profitable for Amex according to Burgess.

This would include the British Airways American Express credit card, the Nectar Amex and the Starwood Preferred Guest credit card.

Below we have taken a look at each of these deals and whether there are any alternatives.

Which cards does that leave? 

Some of the Amex line up are exempt from the rules – you can read why at the end of the article.

These are the cards which escape the cap. 

  • The green American Express Credit Card, 
  • American Express Platinum Credit Card, 
  • American Express Platinum Cashback and Platinum Cashback Everyday Credit Cards,
  • American Express Preferred Rewards Gold,
  • American Express Rewards cards. 

British Airways American Express  

The British Airways Credit Card comes with 5,000 bonus Avios if you spend £1,000 within the first three months and a companion ticket after a £20,000 annual spend.

You also get 1 Avios for every £1 spent on the card.

The closest alternative is of course its British Airways Premium Plus Credit Card which we have looked at above.

Any Avios earned from the Amex cards are kept in a BA Executive Club account which you can keep even if you close your card. If you were to switch to a new card, you can move the pot with you.

Lloyds Bank currently offers an Avios Credit Card Account with two cards – an Amex paying 1.25 Avios per £1 and a Mastercard paying 1.25 points per £5 spent. 

There are no companion vouchers but you get double Avios for six months, no foreign transaction charges and a free upgrade after a £7,000 annual spend.   

You can still sign up to this card but according to Burgess it may also not be around for long.

A spokesperson at Lloyds Bank told This is Money: ‘American Express has notified European regulators that it intends to discontinue its existing UK licensing arrangements. At present there is no impact on our customers, who can continue to use their American Express credit cards as normal.’

Nectar Credit Card 

The Nectar Credit Card pays 20,000 Nectar points to sign up (worth £100). The annual fee is waived in the first year, after that it costs £25 per year.

It pays two points per £1 spend on the card, or double for spends with Nectar partners.

This compares to two points per £1 at Sainsbury’s stores and one point per £5 spent elsewhere on the Sainsbury’s Bank Nectar Purchase Credit Card. 

This free card also comes with 31 months 0 per cent interest on spending and 1,000 points per £40 spend with the supermarket within the first two months (up to 10,000).

Starwood Preferred Guest American Express

The Starwood Preferred Guest Amex which offers 10,000 Starpoints to sign up – enough for three night’s free accommodation.

The card comes with a £75 annual fee and pays one point per £1 spent. The card comes with free cover for delayed baggage and flight cancellations, plus points can be swapped for frequent flyer points with 30 major airlines at the same value including Emirates, British Airways, Etihad and Virgin Atlantic.

However this is likely to change next January when Marriot and Starwood Preferred Guest merge.

One lucrative alternative deal is the Hilton Honors Platinum Visa which offers a free weekend night hotel stay at any hotel in the Hilton portfolio after just a £750 spend. 

The card is free and it pays 2 points for every £1 you spend (you get an extra point for spends with Hilton Worldwide). You also get a bonus of 2,500 points for the first four stays with the hotel group within the first year. 

Interchange fees: The story so far 

In 2015 the EU-wide announced a cap on interchange fees – the amount card companies can charge bars, restaurants and shops for processing card payments.

The aim was to stop the two payment processing companies, Mastercard and Visa from exploiting their position, and charging inflated fees.

The cap sits at 0.3 per cent, compared the 0.75 per cent or more previously charged.   

Initially it looked like Amex would largely escape the fee cap as the structure of its business is slightly different – spanning two stages of a transaction as a credit card issuer and payment processor. 

The rules did mean that franchised cards offered through other banks, including the Lloyds Avios Credit Card Account, also fall under the same rules.  

MBNA also scrapped eight of its Amex airline credit cards last year, including its Atlantic, Emirates and American Airlines cards.   

Amex’s range of its own cards mentioned above didn’t fall under the same rules but there was a review as to whether those offered in partnership with other companies should be affected by the cap.

Thanks to the European Court of Justice’s new ruling, after a final appeal from the Amex, it is certain co-branded deals – such as the Nectar or Starwood Preferred Guest deal – won’t escape the restrictions.