Lloyds Bank has dealt a blow to existing customers by hacking at the rewards for its popular Avios Rewards credit card.
The account was taken off the shelves in May but the high street giant is now scaling back rewards for existing customers too.
American Express cards are being phased out and replaced with a new Mastercard paying 0.4 Avios per £1 spent – compared to up to 1.25 per £1, previously – making it far less generous.
Airline rewards: The Lloyds Bank Avios Rewards credit cards are being scaled back
Lloyds has scrapped the annual fees on the card, but gone also are the the fee-free overseas spending – a rare find on a rewards card – and seat upgrade vouchers.
The changes are being made as American Express is no longer issuing cards through third party banks, so Lloyds will no longer be able to offer the Amex card linked to the account.
This is a knock on effect of the EU’s cap to interchange fees in 2015 which slashed the amount of money banks and card provider could earn when processing payments.
When will you be told?
Lloyds is gradually sending letters to affected customers, between now and April 2019.
Customers will then be given 60 days after they receive the letter before the changes take effect.
You will receive a new card in the post and given a partial refund on any card fees paid in the past 12 months.
Direct debits will be automatically transferred but you will need to set up new standing orders for any subscriptions you have set up on your card.
A spokesperson at a Lloyds Bank says: ‘American Express is discontinuing its existing licensing arrangements in the UK.
‘Customers who currently hold an American Express credit card with Lloyds Bank will see their product replaced by a Lloyds Bank MasterCard. We are in the process of writing to those customers to communicate this change. In the meantime, customers can continue to use their Lloyds Bank American Express credit cards as normal.’
You can find out more on the Lloyds website.
The Lloyds Avios Rewards card previously offered customers both an Amex and a Mastercard attached to the account.
The major benefit of this was that if a shop didn’t accept Amex you could still earn points on spending.
When launched, its Lloyds Avios Rewards card cost £24 per year and offered double points for the first six months.
Are any other cards changing?
The most popular of all the deals changing is the Lloyds Avios Rewards Card.
But according to Rob Burgess, Lloyds is also making changes to the premium version of the same card the Lloyds Premier Avios Reward which carried an annual £140 fee.
Those with an old Lloyds Duo Avios card, Lloyds Duo Premium Avios and Lloyds Choice Rewards cards are all also being moved to the same Mastercard-only Lloyds Avios Rewards card.
It came with no foreign transaction fees and a flight upgrade after you spent £7,000 in a year.
On top of this your spending then earned 1.25 Avios per £1 spend on the Amex card and 0.2 Avios per £1 on the Mastercard.
If you split a £1,000 monthly spend on the card between the Amex and the Mastercard you would have earned 8,700 Avios over the course of a year.
That’s enough to get a return flight to Paris or Amsterdam.
Plus you would have bagged yourself a seat upgrade at the same time.
Avios points can be used on Aer Lingus, British Airways, Flybe, Iberia and Vueling flights.
As mentioned above the new deal is fairly basic with just one Mastercard paying 2 Avios per £5 spend – that’s 0.4 Avios per £1.
On overseas spending you get 4 Avios per £5 spend, so that’s 0.8 Avios per £1.
Excluding any holiday spends, the new rate means a £1,000 monthly spend now earns 4,800 Avios per year.
The card charges 2.95 per cent on foreign transactions and there will be no upgrade vouchers. APR rates will stay the same.
Got a Club Lloyds account? You can earn slightly more
If you already have a Club Lloyds Current Account, and have had one for six months you will get an extra point per £10 spend.
That’s effectively an extra 0.1 Avios per £1, or 0.2 Avios per £1 on overseas spending.
Should you ditch it for a better alternative?
Rob Burgess, of airline rewards site Head for Points, said: ‘If you have a Lloyd Avios Rewards card already, I would keep the replacement.
You won’t find a better Visa or Mastercard earning rate than 0.4 Avios per £1. You should, however, get yourself a separate 0 per cent Foreign exchange fees credit card now that the Lloyds card is not free abroad as well as a separate American Express to benefit from the higher rewards those cards offer.’
Other top-paying alternatives include the American Express Preferred Rewards Credit Card.
It offers Membership Rewards that can be swapped like-for-like with a handful of big name airline schemes, including British Airways, Emirates Skywards, Etihad Guest and Virgin Atlantic FlyingClub.
It’s a premium card with a £140 annual fee – this is waived for the first year (and 22.9 per cent interest on spending).
You receive 20,000 Membership Rewards if you spend £2,000 within three months, 10,000 points for every year you spend more than £15,000.
Plus spends earn one point for each £1 and two points per £1 for foreign currency spends or airline bookings.
Virgin Bank has also launched two credit cards this year, to be used with Virgin Atlantic.
Its premium Reward+ Credit Card costs £160 a year with 22.9 per cent interest on purchases.
It offers 15,000 bonus points on your first card purchase, 1.5 Flying Club miles for every £1 you spend and a companion voucher or free upgrade after a £10,000.
The free Virgin Atlantic Reward Card also has a 22.9 APR per cent interest. It offers 5,000 bonus miles on first card purchase, 0.75 miles per £1 spent and a companion ticket or upgrade after a £20,000 spend