Editor’s pick: Travel rewards cards with no annual fee
By Emma Lunn
If you're a frequent flyer, you know how expensive a travel habit can be. A credit card that offers travel rewards (like free flights) can therefore be a tempting prospect.
The trick, however, is to make sure that the card doesn't end up costing you the money you're trying to save. One way to keep costs down is to pay off your balance on time to avoid the high interest rates that often go hand-in-hand with rewards cards.
"If you can't, then you should really choose a card based on its interest rate because the interest charged is likely to exceed the value of any rewards earned," says David Black insight analyst for banking at financial research company Defaqto.
Another way to cut costs? Avoid annual fees. The top-tier cards with the richest rewards don't come free, yet there are plenty of travel rewards cards that have no annual costs. We've rounded up five of the most rewarding options (See table below).
- British Airways American Express
The 19.9% annual percentage rate (APR) on this card is slightly above the national average -- which is 17.3%, according to the Bank of England. Yet you'll earn 3,000 bonus Avios points (the new name for Air Miles) when you spend £1,000 within the first three months of having the card. After that, you can earn one Avios point for each £1 you spend thereafter.
If you redeem your Avios points on a British Airways flight, and have spent £20,000 on your card in a year, you get a free ticket for a companion for the same flight and cabin.
To be eligible for the card, you'll need to earn more than £30,000 and not have any county court judgments (CCJs) for non-payment of debt.
Atlantic credit card account
With an average APR of 17.9%, this option also offers 0% on balance transfers for six months. Once you are approved, you will receive two cards -- an American Express and a Visa, both of which earn miles redeemable through Flying Club, Virgin's frequent flier program.
Cardholders earn one Flying Club Mile for every £1 spent with the American Express card and one mile for every £2 spent with the Visa card. You'll also get 3,000 miles with your first card purchase and earn an extra 6,000 miles if you spend £1,000 on either card in the first 90 days. You can put your miles towards Virgin flights as well as other travel expenses, such as car hire and hotel stays.
- Flybe MasterCard
The Flybe card offers 0% on balance transfers for 12 months and charges an 18.9% APR on standard purchases.
New cardholders will receive a bonus return flight to one of a number of select destinations after the card's been activated and they've made an initial purchase. If new cardholders spend £500 within the first 90 days of account opening, they'll be rewarded with another free flight.
Cardholders earn points by using the card for everyday shopping and for Flybe flights. Each £250 spent with the card translates into one reward point, and each return flight requires between 16 and 30 points, depending on the destination. Passengers can also cash in their points for a year of airport lounge access.
Other perks include discounts on airport parking, hotels and car hire.
Miles & More
At 16.9%, the Lufthansa Miles & More card has one of the lowest APRs out of the travel rewards cards we looked it. It also offers 12 months interest free on balance transfers and three months interest free on purchases.
The account comes with two cards. The American Express card from MBNA offers 1.5 reward miles for every £1 spent (two reward points per pound during the first six months), while the Visa gives 1.5 miles for every £2 spent (one point for every pound during the first six months).
Customers also get a welcome bonus of 1,500 award miles. Miles can be spent on flights, hotels, car hire and shopping.
- Lloyds TSB Duo
Avios credit card account
This account comes with a pretty decent APR (15.9%) and also offers 0% on balance transfers for six months.
Like the Virgin and Miles & More cards, this account comes with two cards -- and American Express and a MasterCard. Using the AmEx will earn one Avios point for each £1 spent, and the MasterCard earns one Avios for every £5 spent. Cardholders earn double points for using the cards abroad.
If you transfer an existing credit card balance to the card, you'll also collect 1,500 bonus Avios for every £1,000 switched from a single provider.
To find the best annual fee–free card for you, check out our card-comparison chart. Select the program to view its rewards and other features. APRs will vary by credit-worthiness. Check with the issuer to get the most up-to-date terms and conditions.
See related: How to avoid unnecessary fees on budget airlines, How to extend the life of your air miles
Published: 25 April 2012
- Guide to travel rewards schemes – If you travel frequently, a travel rewards card may be a good option. The key to these cards is the same with other rewards cards: don't spend just to earn points, and find one that fits with your life and travel styles ...
- Abundance of Avios not always enough – If you apply for an Avios rewards credit card in the hope of getting free flights, you may be in for a nasty surprise -- hefty charges, payable only in money, not miles ...
- Firsthand account: There's no such thing as a free holiday – Our reporter chose British Airways American Express credit card for the Avios that come with every purchase. But four months later, she wonders: Was this a smart move? ...