Are credit card points ever worthwhile?

If you’re feeling broke and miserable after party season, the possibility of earning free international travel and luxury hotel stays is pretty tantalising.

I’m talking, of course, about credit cards points that can be exchanged for travel perks and all manner of other goodies. With current deals particular appealing in drizzly January, you may well be tempted to apply for one — and lots of you have been asking me if I think they’re worth it.

The short answer is “probably not” — unless you’re wealthy, self-disciplined and are totally on it with your finances. But the richer you are, the better the payback could be.

Readers in the US are the most richly rewarded when it comes to points deals — there are countless offers, and it’s much more common for consumers to have a fistful of different credit cards.

The generosity of UK deals is limited by the cap on interchange fees (the charges that merchants pay to accept cards, which in effect fund the rewards).

However, the current welcome offer for new UK customers taking out an Amex Platinum card is its biggest ever, with the potential for them to bag up to 100,000 Amex membership rewards points. Depending on what you choose to exchange them for, this could net you a £500 gift card, or enough Avios points for a return flight from London to New York, plus a host of other perks such as money off in Harvey Nicks and selected posh restaurants.

For the deal to be “worth it” you’d need to be able to afford to spend £1,000-£1,700 a month on lifestyle purchases in places that accept Amex

The main downside is the £650 annual fee. The Amex Gold card has no fee for the first year, and currently offers up to 30,000 reward points, four airport lounge passes and up to £120 of Deliveroo credit (you have until 9pm on Tuesday if you want to take advantage of either deal).

It’s tempting — but more frugal readers will be horrified at the spending torrent that could be unleashed by signing up to such a card.

To gain the maximum amount of points, Platinum card holders need to channel £10,000 worth of spending through their card in the first six months. Gold customers must spend £3,000 within three months.

So for the deal to be “worth it” you’d need to be able to afford to spend £1,000-£1,700 a month on lifestyle purchases in places that accept Amex, and, crucially, clear your balance every single month without fail.

I cannot stress this last point strongly enough. If you carry a balance, fearsomely high rates of interest await (31 per cent on Amex purchases) which will wipe out the value of any points. If you pay interest on your credit cards, forget rewards and get a specialist low-rate card instead (listen to this week’s Money Clinic podcast for more).

I am not naturally a high spender, as regular readers of this column well know. Do I want a card in my wallet or phone that psychologically tempts me to spend more, plus an app stuffed with yet more spending-linked discounts at bougie brands? Not on your nelly! I’d rather keep a lid on the lifestyle creep and max out my monthly pension and Isa investments.

However, I recognise that many FT readers have different ways of wringing enjoyment from their hard-earned cash.

The good news for them is that seriously high earners (and spenders) who travel a lot have the most to gain from points deals.

I spent a pleasurable hour this week travelling down the rabbit hole of point collecting with Rob Burgess, editor of HeadforPoints.com, the frequent flyer website.

Aside from the points you would get for signing up, the value of the points you can earn for taking flights and staying in hotels — particularly if you travel for work and are enrolled in a frequent flyer or hotel loyalty programme — has to be taken into consideration.

“If you don’t travel for work but maximise sign-up deals and other promotions, a solo traveller would be able to earn enough for one long-haul business class flight every 12-18 months,” he says. Another popular perk for couples is the British Airways Amex card with its annual “2-4-1” voucher.

The Head for Points website is stuffed with articles about squeezing the maximum from your Avios and hotel points. People obsess over this stuff!

“One reason why the better-off tend to like point-collecting as a hobby is because the more premium the cabin you travel in, the better value your points will be,” he reveals.

For example, a first-class fare could be 15 times the price of an economy fare, but if you buy a flight with points, you’ll only need roughly four times as many.

“If you’re the sort of person who would only ever fly business class to New York as a special treat, then you’re not really saving the £2,000 cost of the air fare if you use points,” he says. “However, if you are the kind of person who flies business class everywhere, then it is a genuine saving.”

The same goes for the perks used to justify the high annual membership fees on these kinds of cards, such as entrance to airport lounges, travel insurance policies and so on. If this is something that you would pay money for anyway, then it could be worth it.

Burgess’s other top tips? Wait for introductory deals. Virtually all travel reward cards run enhanced sign-up deals a couple of times a year. Being patient could net you up to 25,000 extra Avios.

When applying, don’t add a supplementary card for your partner. After a month or so, he says, most card providers will offer extra bonus points if you add an additional card holder.

While travel-related cards have become more generous, you may have noticed, like me, that points deals on John Lewis, M&S and supermarket-backed credit cards have become less so.

Spend £500 on these sorts of cards, and Burgess estimates you’ll get the equivalent of £1 to £2 back in vouchers.

His tip for people like me was getting the (fee-free) Barclaycard Avios Mastercard. As someone who has taken one international flight since 2019, collecting Avios has always seemed pretty pointless. However, if I convert my Avios to Nectar points, I can spend them in Sainsbury’s — and putting £300 through my credit card would net me £2 worth of points.

If you’re the kind of person who turns left on a flight, points deals are well worth checking out. For the rest of us, aspiring to the kind of lifestyle most people can only dream of could seriously dent your long-term financial prospects.

Claer Barrett is the FT’s consumer editor and author of the FT’s Sort Your Financial Life Out newsletter series; claer.barrett@ft.com; Instagram @ClaerB