An Expat’s Guide – Forbes Advisor

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Moving to the United Kingdom? If so, you will arrive to find a very different credit card landscape. In general, UK credit cards that earn rewards are less generous than comparable programs in the US

While many banks in the US compete with each other to attract new cardholders and be the primary card in your wallet, the UK rewards space is much less competitive and is primarily dominated by American Express.

While Amex is less widely accepted in the UK than in America, American Express cards are generally accepted at major retailers, restaurants, grocery store chains. Nevertheless, Amex cards provide the best rewards offerings in the UK by a wide margin, due to a loophole in the regulations governing how much card issuers can charge merchants for accepting their cards.

Find The Best Credit Cards For 2022

No single credit card is the best option for every family, every purchase or every budget. We’ve picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.

What You Need to Know About UK Credit Cards

  • Rewards programs are much less generous in the UK than in the US
  • European Union (EU) regulations cap the amount that card brands can charge merchants, meaning there is less money to be spent rewarding consumers.
  • American Express is the undisputed king of the UK rewards space, due to its exemption from the cap.
  • Even with the exemption, American Express cards provide much more generous rewards in the US than in the UK
  • Besides Amex, most cards are offered in conjunction with retailers or by the retailers themselves and provide relatively small return on your spending.

How Rewards Programs Operate

At Forbes Advisor, we regularly report on both earning and redeeming points and miles to maximize the return on your spending. The rewards ecosystem is primarily funded by the fees merchants pay for accepting cards. There are several such fees, but the largest by far is the interchange fee, which the payment network charges for processing the transaction.

Generally the most of the interchange fee goes to the bank that issued the card. While the issuing bank has other sources of revenue, including interest income, annual fees, and foreign transaction fees, the interchange fee is the primary source of revenue for the issuing bank.

Because the bank’s revenue is driven by cardholder spending, banks compete to be at the top of your wallet when making a purchase. Some of that interchange fee revenue is returned to cardholders through rewards programs, perks and other incentives.

In 2016, the European Union passed a law capping interchange fees at 0.3% for credit cards. Because the bulk of the interchange fee generally goes to the issuing bank, this significantly limits the revenue of card issuers. The rewards they offer are similarly restricted, as they cannot return more to you than they are earning from the merchant. Though the UK has left the EU, this limit remains in effect with a loophole for American Express.

American Express

The EU rules only limit interchange fees for “four party payment schemes” where the customer, merchant, issuing bank and acquiring bank are involved in a transaction. Amex operates its own payment network, meaning there are only three parties involved in the transaction and no interchange fee is charged. This permits Amex a much higher 3% cap on the fees they charge merchants.

This has left Amex the undisputed king of the rewards space in the UK, because they are able to offer more generous rewards to their cardholders with the additional revenue from merchant fees.

Even though Amex is much more generous with its rewards program than other issuers in the UK, the benefits are still significantly richer in the US

Comparing Card Benefits

The chart below compares the rewards potential of The Platinum Card® from American Express (Terms apply. See rates & fees), the flagship product offered by Amex, in both the US and the UK The British version of the card offers a smaller welcome bonus , narrower and smaller bonuses on travel and fewer statement credit options, while carrying a higher annual fee.

Both American Express cards earn Membership Rewards points, which can be redeemed for statement credits, transferred to a variety of different airline partners, including British Airways Avios or redeemed for cash in the form of a statement credit.

The stronger British Pound on its own deflates the earning potential of the UK version Amex Platinum card, since instead of earning one point per dollar, cards in the UK earn one point for $ 1.26 (at time of writing). Additionally, British Platinum Card users will earn rewards more slowly because the points bonus for airline spending is only 2 points per pound and even then only when booked through the Amex travel portal. In the US Amex offers 5 points per dollar spent on travel booked directly with the airline or through Amex Travel, plus 5 points per dollar on hotels booked through Amex as well.

The welcome bonuses in the UK are also less generous. In the US Amex restricts welcome bonuses to once per card. If you have previously held that particular card with Amex, you would not be eligible for the often generous bonus. In the UK, Amex is even more restrictive— new customers are only eligible for a welcome bonus if they have not held an Amex consumer card in the last 24 months. With Amex as the only rewards game in town, this effectively makes the bonus once-in-a-lifetime for those seeking to maximize the return on their spending.

Beyond Amex

Beyond Amex, the UK rewards card space is split into two camps — cash back and co-branded cards. Cash back cards, as you might expect, return a percentage of your spending to you as a statement credit. Issuers of co-branded cards partner with (or are even owned by) a retailer with a loyalty program that can offer extra perks.

Many UK rewards cards, including those offered by Barclaycard and HSBC, focus on cash back. And while there are several American cards offering 2% cash back, the Barclaycard only offers 0.25%. HSBC offers one point per pound and 100 of these points can be redeemed for £ 1, meaning the card effectively gives 0.2% cash back. Return on spend is generally in this range due to the thinner interchange fees banks have to work with.

Several major UK retailers, including Sainsbury’s, Tesco, Marks & Spencer, John Lewis and Amazon all have affiliated credit cards. Most of them have banking arms that issue the card themselves. These cards then provide rewards in the retailer’s loyalty program (or gift cards in the case of Amazon). Generally these points are less valuable than Amex Membership Rewards, but can still provide some benefits to reward your spending.

Find The Best Credit Cards For 2022

No single credit card is the best option for every family, every purchase or every budget. We’ve picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.

Bottom Line

If you are an American moving to the UK and want to continue to earn points and miles, your best bet is to apply for an American Express card. If you already hold an Amex card issued in the US or elsewhere, the company’s Global Card Transfer program will make it easier for you to obtain a UK card based on your foreign credit history.

Other rewards cards besides Amex will still provide some rewards and perks, but at a much less generous rate than you may be used to in the US Consider applying for one of these as well, as Amex is not accepted by every merchant in the UK This will allow you to earn maximum rewards on all of your credit card spending.

To view rates and fees for The Platinum Card® from American Express please visit this page.

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