Is Lloyds Avios Rewards now the best credit card for FX spend?

The Lloyds Avios Rewards credit card was a game-changer when it launched in October.  For the first time, we had a credit which offered NO FOREIGN EXCHANGE FEE – AND gave you Avios points for your spending as well!

Historically, it was almost always a bad idea to use a mileage card for overseas spend.  This is because all other miles and points cards – and indeed almost all other UK credit and debit cards – charge a foreign exchange fee of 2.99%.  Most card issuers hide this fee so you don’t realise you are paying it, because they simply adjust their exchange rate by 2.99% rather than breaking the fee out.

The key question, then, is whether or not the Lloyds Avios Rewards card is worth getting.

Which cards charge no FX fees?

There are three main FREE credit cards in the UK which do not charge any fees on overseas transactions:

The Post Office Credit Card – no annual fee, 0% on FX purchases, 2.5% (min £3) cash advance fee on FX cash withdrawals, no cash advance fee when you buy foreign currency at the Post Office.  (Representative APR 17.8% variable, the Post Office credit card is provided by Bank of Ireland UK.)

Halifax Clarity – no annual fee, 0% on FX purchases, no ‘cash advance fee’ on FX cash withdrawals  (representative APR 12.95% variable)

Capital One Classic Extra (low credit limits) – no annual fee, 0% on FX purchase, 3% (min £3) cash advance fee on FX cash withdrawals.  This card also pays 0.5% cashback on all purchases!  You are unlikely to get a credit limit above £1,500 however. (representative APR 34.9% variable)

There is also a Saga card if you over 50.  This has a £2 / 2% cash advance fee but does not charge any interest on cash withdrawals if repaid immediately.  Nationwide also has a ‘no fees’ card but this is only available to its current account holders.  The Santander Zero card, which did perform well, is no longer available to new applicants.

There are also three debit cards worth considering, although you will need to open a current account with the relevant bank which is an added complication.  These are Norwich & Peterborough Building Society, Metro Bank (although they are limiting their ‘free FX’ deal to Europe from March) and Cumberland Building Society.

How does the Lloyd Avios Rewards card compare?

The Lloyds Avios Rewards card comes with a £24 annual fee which makes it worse than the Post Office and Halifax Clarity cards.  There is also a 3% fee on cash withdrawals abroad.

You will, however, receive 1.25 Avios per £1 spent abroad on the Amex card and 0.25 Avios per £1 spent abroad on the MasterCard.  The Post Office and Halifax Clarity cards have no rewards programme.

If you value an Avios at 1p, and assuming your foreign spend is 75% Amex (your hotel will take it) and 25% MasterCard, then the Lloyds Avios Rewards card is a better deal than the Post Office or Halifax cards if you spend over £2,400 abroad each year.

(Why?  Because your £24 annual fee will be offset by the 2,400+ Avios earned back)

Is it ever worth using another credit card abroad and swallowing the 3% fee?

You may not want to go to the trouble of applying for another credit card just for overseas transactions.  You may also want to increase your chance of getting further travel cards by not ‘wasting’ some of your credit score on a ‘no FX fees but no miles’ card.

There are some miles and points cards which are a decent choice for using abroad if you don’t want to go to the trouble of applying for a ‘no FX fees’ card.

The American Express Preferred Rewards Gold card (click for review) gives you double points when you use it abroad.  This means you get 2 Membership Rewards points per £1, which converts to 2 Avios per £1.  This does not fully offset the 2.99% FX fee, but comes close.  Amex’s home page for the card is here.

The free TSB Avios card (click for review) earns double Avios points when used abroad.  This means that Amex card (on the free version) earns 2 Avios per £1 which offsets much of the FX charge.

The IHG Rewards Club Black Visa card (click for review) gives you 4 IHG Rewards Club points per £1 spent abroad.  These can be redeemed for free nights at Crowne Plaza, Holiday Inn, InterContinental etc hotels.  I value these at roughly 0.5p per point, so 2p of value per £1.  This almost offsets the 2.99% FX fee.

Spending abroad also helps you to achieve spending targets

The IHG Rewards Club Black card mentioned above also gives you a free night voucher when you spend £10,000 per year.

The Virgin Atlantic cards offer upgrade vouchers when you hit specific spend thresholds.

And of course the BA Premium Plus Amex gives you a 2-4-1 voucher for Avios redemptions valid in any class when you spend £10,000 per year.

You may find it worthwhile paying the FX fee on your credit card in order to achieve some of your spending target.  After all, for most of us our holiday is one of the main expenditures of the year.

Conclusion

Unless you are struggling to hit an annual spending target, you should seriously consider adding the Post Office, Halifax Clarity or Lloyds Avios Rewards cards to your wallet, purely to use for overseas spending.

If you will spend over £2,400 abroad and are happy to pay the £24 fee, the Lloyds Avios Rewards card is a good choice – otherwise go for the free Post Office or Halifax cards.

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Want to earn more points from credit cards? – April 2024 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

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:

SPECIAL OFFER: Until 12th May 2024, the Capital on Tap Business Rewards Visa card is offering a bonus of 30,000 points, convertible into 30,000 Avios. You must have a Limited Company to apply. Click here to learn more and click here to apply.

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.