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Should you pay £195 a year for an Avios rewards card?

Rewards credit cards split into three camps – free cards, those with an annual fee of around £25 to £35, and ‘Premium’ cards which carry fees of around £150.

As you would expect the most eye-catching rewards come with the most expensive deals, offering ‘exclusive’ perks, generous sign-up bonuses, and more points per pound on your spending.

But are they ever worth it? 

We have broken down the numbers to see how much you would have to spend to make one of these cards worth your while and rounded up the top deals. 

Sky high: Some of the most rewarding airline rewards cards come with annual charges of £150 or more

After an EU-wide cap on interchange fees – the amount card companies can charge bars, restaurants and shops for processing card payments – in 2015, decent rewards schemes are few and far between.

Many credit card companies claimed this ate into the profits they used to fund their lucrative cashback and reward deals, and subsequently scaled back or scrapped their top deals completely.

But if you hunt around there are still a few good deals which, if you make sure to clear your balance each month, can earn you a little extra from your spending.

The most eye-catching deals however come with hefty annual fees typically around £150, but some cost as much as £450 per year.

Of course the first thing to think about is whether you will make the most of the rewards points – there is no point signing up to a credit card offering airline points if it doesn’t fly from a nearby airport, or for a supermarket rewards card which doesn’t have a shops for miles.

To make the most of these cards you need to use them for as much of your spending as possible, which means you will clock up a fair balance each month.

Arguably the most important rule therefore is, you MUST clear the balance each month.

If you don’t repay the amount you have spent, interest is applied to your debt typically around 23 per cent on purchases.

This would mean £19.08 in interest each month on a £1,000 balance – which quickly eats away at the value of your earnings in rewards.

Where do you get the most bang for your buck?

The best deal for you will depend on where you shop, what type of rewards you want and whether you will actually make use of the points on offer.

However, we have put together a table of the accounts which come with higher earning power and better perks. 

Card Fee Perk APR  % (Purchase rate)
BA Premium Plus Amex £195 Earn 1.5 Avios per £1 and collect double on BA holidays and flights. 25,000 bonus Avios after £3k spend within 3 months. Free companion voucher each year after £10,000 spend, British Airways Executive Club membership. 76% (22.9% p.a)
Preferred Rewards Gold Amex £140 (£0 in first year) Earn 1 point per £1, or 2 points per £1 on flights or in a foreign currency and 3 points per £1 with American Express Travel. Get 20,000 Membership Rewards points when you spend £2k within 3 months and 10,000 bonus after £15k annual spend. Plus 2 Lounge visits per year, 10% off with Hertz. Must be paid off each month
Virgin Atlantic Black Credit Card £140 Earn 2 miles per £1 you spend with the American Express credit card from MBNA, and 1 mile per £1 you spend on the Visa credit card. Card comes with 0% on balance transfers for 6 months plus earn 18,500 miles the first time you spend on your card in the first 90 days. 57.4% (22.9% p.a.)
Platimum Amex Annual Fee £450 Earn 1 point per £1. 30,000 Membership Rewards after £2,000 spend within 3 months. Access to airport lounges, worldwide family travel insurance, Platinum Concierge service. Must be paid off each month
Emirates Skywards Elite MBNA £150 2 miles per £1 spent on Amex, 2 miles per £2 on the Visa. Double points for spending with Emirates. 0% interest on balance transfers and money transfers for 6 months, 10,000 Skywards Miles after first purchase within 90 days. 0% on Emirates flight purchases for up to 12 months. 60.5% (22.9% p.a.)
Tesco Premium Credit Card £150 1 month 0% on balance transfers and purchases. £50 Tesco Gift Card until 31 August, 5,000 points with £5,000 annual spend, worldwide family travel insurance for those under 70. 56.5% (19.9 p.a.)

Are they worth your while?

Firstly work out how much each point is actually worth and what they earn you.

Below are a few examples of what a £1,250 monthly spend could earn you, and how it compares to any lower fee options.

Remember though these deals are only worth anything at all if you are going to use the points and you don’t let them hit you with interest, by making sure to repay your balance each month. 

British Airways Premium Plus Amex 

The 25,000 Avios sign-up bonus is enough to get you a return flight to most European destinations and even as far as Cairo.

This compares to just a 5,000 Avios bonus if you take out the no-frills version of the card, the BA Amex credit card.

Spending £1,250 a month would earn 22,500 BA Executive Avios, in a year (47,500 including sign-up bonus) while the same spending on the free option gets you 15,000 points (20,000 including sign-up bonus).

 Using 40,000 of the points earned from the Premium Plus card gets you a return ticket to New York

If you stump up the £195 annual fee for the Premium Plus card, Amex also gives a free companion flight if you spend more than £10,000 on the card, compared to a harder to achieve £20,000 threshold on the standard BA Amex. 

Using 40,000 of the points earned from the Premium Plus card gets you a return ticket to New York, and if you cash in your companion voucher you get double the value. 

When This is Money checked, if you paid for a pair of tickets yourself, you would handover £1,400.94 booking six months in advance.

However you still need to pay taxes, which cost £367.47 per person on this flight. 

After your £195 annual fee you effectively therefore save £471 using the BA Premium Plus Amex.

But remember in the second year you won’t receive the 25,000 Avios bonus, which makes it less lucrative.

Using the free version, you could use 15,000 of your points to fly to Rome, paying £35 in taxes or £70 for two people. Booking two return tickets six months in advance would cost a total £227.00.

More rewarding: Tesco offers a premium version of its Clubcard credit cards which could prove a better way to earn airline rewards points 

More rewarding: Tesco offers a premium version of its Clubcard credit cards which could prove a better way to earn airline rewards points 

Tesco Premium Credit Card – best after the first year and free travel insurance

If you would prefer supermarket rewards, Tesco offers its own Premium Credit Card with a £150 annual price tag, or £100 in the first year with the £50 sign-up bonus. 

A £1,250 spend each month (including £500 spent at Tesco), plus the 5,000 annual bonus once you spend £5,000 on the card would mean a total 19,250 points.

You can use your points in stores, and one point is worth 1p – meaning a total £192.50 off your shop.

Or you can swap them for up to four times their value with Clubcard partners, which include restaurants, days out and travel.

You can also swap your Tesco points for Avios and Virgin Flying Club points. After a year the above spending example would earn you 46,200 Avios or 48,125 Flying Club miles. 

Tesco however also sweetens the deal with free family worldwide travel insurance for anyone under 70. 

Tesco Bank has a free version which would earn 8,625 point per year, it comes with no insurance but it has an option giving 30 months 0 per cent interest on purchases or a low rate card with interest of 5.9 per cent.

Preferred Rewards Gold Amex – free for the first year

The Preferred Rewards Gold Amex may be a better option. At £140 per year it is still expensive, but it offers the ability to buy points from several other schemes with your rewards, making it more flexible. 

You won’t be charged the fee in the first year, but this is a charge card, so you will have to pay the money off at the end of each month. 

A £1,250 monthly spend on the card in the first year earns 15,000 Membership Rewards points (but you could earn more if you are spending on travel or foreign currency). Plus you get the 20,000 sign up bonus –  a total points pot in the first year of 45,000.

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

Or you can use points to buy retailer gift cards, to help pay off your balance and to spend in the Membership Rewards shop.

There is a cheaper Membership Rewards Amex card, costing £60 per year, which comes with a 10,000 point sign up bonus which pays the same 1 point per £1 spent.  

The same monthly spend would earn you 15,000 points, or 25,000 in the first year.