Air Mile Cards are amongst the most popular UK credit cards products, with generous rewards that help people live their jet-setting dreams.
What are air mile credit cards?
Air mile credit cards are a type of reward card, which offer people the opportunity to earn points for popular airline frequent flyer schemes.
These cards are typically reserved for customers with high incomes and good credit scores, but the aspirational nature of airline rewards means there's no shortage of applicants wanting to benefit.
How do air mile credit cards work?
Air mile credit cards have been amongst the popular UK credit cards for decades due to the simplicity of their proposition. For every pound you spend, you earn rewards. These rewards are then exchanged with frequent flyer programs for flights, upgrades and other travel related benefits.
Of course, there is a little more complexity to these products, but not much!
Many air mile cards offer bonus points/miles to incentivise people to sign-up (and start spending). These bonus miles, which are offered at very generous levels, are an excellent way to kick start accruing points. In most instances, you are required to make a minimum spend within a particular timeframe for the bonus miles to be triggered, so you should ensure that you are likely to meet these requirements before applying.
One card or two?
Depending on the particular account you apply for, you may get one or two physical credit cards. For customers used to one card per account, this can be confusing, but the reasons are straightforward.
Air mile cards pay for the rewards they offer from the 'interchange' they receive (the fee charged to merchants for accepting card payments). Different payment platforms charge merchants different levels of interchange, with Amex charging the highest level. Higher interchange means card issuers can afford a higher earn rate, which is good for cardholders. However, Amex acceptance in the UK lags behind other payment networks, because of the very fact that it costs merchants more to take Amex payments. This presents card issuers with a dilemma; they want customers to enjoy the higher rewards that Amex enables them to offer, but they do not want to restrict where users can earn points. For this reason, Amex cards are often paired with cards from one of the more established payment networks, such as MasterCard or Visa. The rate at which you earn points for the alternative card is lower than the Amex card, but it does enable you to earn rewards where Amex is not accepted.
In the background, both cards are links to the same account, and the credit limit is shared across the products, so having two cards should not add to the complexity of managing your credit account.
Increased earn rates
Frequent flyer schemes were originally established to help develop loyalty to a particular carrier. It should be no surprise, therefore, that purchases with that carrier offers better earn rates than you'd receive for shopping elsewhere.
Annual Fees - to pay, or not to pay?
Unlike most other UK credit cards, annual fees are still common with air mile card category. Of course, there are cards which do not charge an annual fee, but there can be advantages to paying.
The main advantage is that cards charging an annual fee offer users is an increased reward rate. However, you'll need to calculate whether the value of the increased rewards justifies the fee you'll pay. There's no point in paying for an increased earn rate you won't use, or that unnecessarily commits you to higher spend levels.
What other benefits do air mile cards offer?
Many air mile cards offer additional features, beyond those shared by them all. Whether these benefit you depends on your circumstances, but they can include:
These are not available with all cards, and require a minimum spend before you receive them, but companion vouchers are one of the prized rewards available from air mile card programs, since they enable you to double the value of your rewards, by taking a companion with you when you exchange your points for a flight.
Loyalty discounts on purchases
Depending on the breadth of services available from the group your card is associated with, you may find that you can gain discounts on particular products and services they offer.
Introductory 0% offers
Although rare, some air mile cards offer their cardholders the benefit of 0% interest on purchases, balance transfers, and money transfers for an introductory period. These offers tend to be a poor relation to cards specifically designed for these features, but they can provide a useful additional benefit, particularly for those delaying an air mile card application while they wait to clear an existing balance.
Some air mile cards (usually those with a high annual fee) offer their cardholders free travel insurance when they pay for their travel with their card.
Enhanced purchase protection for purchases made with their card is available on a number of air mile cards. This protection is in addition to the extra protection that all UK cardholder receive through section 75, and sometimes includes insurance against theft and damage to purchases, within a limited timeframe.
American Express offers
Air mile cards which use Amex as a payment platform, entitles their users to benefit from 'American Express Offers', a bespoke discount program for Amex users.
To use these discounts, the customer selects their desired offers and saves them to their card (easily done using the Amex app). They then use their card as normal, and if they make a purchase that qualifies for a discount, they receive a 'statement credit' for the value of the discount (eg. 5% back at Jamie's Italian when you spend £75 or more).
Which airlines offer air mile cards?
A number of domestic and international airlines offer air mile cards to UK consumers, including:
Additionally, Avios (International Airlines Group reward program, which includes Aer Lingus, British Airways, and Iberia) also offers cards, with points redeemable for flights on its airlines, and some other carriers (eg. Flybe).
Can I get an air mile card – and should I?
Air mile credit cards tend to have higher eligibility criteria than many other cards. Typically, you'll need to have a good/excellent credit score (no history of bad debt) and a salary that is higher than the UK average.
If you are not sure you will meet these criteria, it is always advisable to check your credit score before you apply, as failed applications can harm your credit score. Some air mile cards offer applicants the ability to conduct a soft-search eligibility check to assess their chance of being accepted before they make a full application. Soft credit file searches do not impact your credit score, unlike the full searches untaken when you apply for credit, so they are an excellent way to protect your credit score from failed application.
Tantalising rewards can encourage us to get cards that are inappropriate, so, beyond the eligibility criteria, you should also consider whether a card is appropriate for you before applying. If you rarely pay off your full balance, an air mile card is unlikely to be a good option for you, since the value of your rewards will be lower than the interest charged on your remaining balance.
Alternatives to air mile cards
Although air mile cards offer the most efficient route to collect frequent flyer points, they are not the only credit cards that can be used in this way. For instance, the universally popular Nectar and Tesco Clubcard reward schemes offer members the ability to exchange their points for air mile points with selected programs. Nectar and Tesco credit card holders forfeit their ability to earn rewards at the higher rate that air mile cards offer, but they do enable their users to retain a greater degree of flexibility as to how they use their credit card rewards.
Unfortunately, there is no simple answer to this question, as it all depends on your circumstances and where you want to go. Cards charging an annual fee are undoubtedly more generous in their rewards, but any benefits must be offset against the initial and ongoing cost of the card. Equally, fee-free cards can be attractive, but a lower earn rate on a potentially high spending level could make annual fee savings a false economy.
Most schemes offer a straightforward online interface through which your points can be exchanged. Also, there are numerous strategies you can use to ensure you maximise the value of your points, and whole online communities are dedicated to discussing these tips and tricks.
The interchange fees that payment platforms/card issuers charge merchants in the USA are considerably higher than those charged in the UK, and a portion of this revenue can be passed on to the cardholder in the form of enhanced air miles. By contrast, because the UK merchants are charged a lower interchange fee, in an effort to keep prices lower, UK card issuers cannot offer the same level of rewards as those of their US counterparts.
On the whole, credit cards are a useful tool to have when travelling abroad. International card acceptance, especially for Mastercard and Visa, is widespread, so they are handy for emergencies. However, UK air mile cards still tend to charge non-sterling transaction fees, so buying abroad can instantly cost as much as 3% more than the purchase price. Coupled with this, exchange rates for credit cards are competitive, but they are not always the best, so you could lose money on the rate of exchange.
Aside from direct purchases, credit cards should only be used for cash in the most extreme circumstances. Cash withdrawals incur high 'cash advance' interest immediately, as well as non-sterling fees, so it can be a costly way to get foreign currency.