The question was this: “Should I pay the 3% surcharge for using my credit card on a £10,000 purchase of a new car? Are the miles worth the £300 fee?”

What credit cards do you have?

Always my first question, as the value of what you get for the credit card surcharge can vary enormously.

By way of example, I’ll briefly analyse two of the most likely options for a UK points collector: the American Express Gold card and the British Airways Premium Plus card.

At the basic level, the Gold American Express would earn 1 point per pound (giving a total of 10,000 miles in most mileage schemes on the purchase, assuming a 1:1 conversion rate from Amex Membership Rewards points). The British Airways Premium Plus card is slightly better, offering 1.5 miles per pounds which would therefore give 15,000 miles. On its own, this is not worth paying for miles. Even at its best (i.e. using the 15,000 miles as an example), because of the 3% surcharge, you would be paying 2 pence per mile, which is way too high.

What have you spent so far this year?

The “value” calculation becomes slightly different if you are close to a spend threshold on one of the cards (not that you need to be particularly close to a spend threshold when you’re splurging £10k). Spend £10,000 in a year on the British Airways Premium Plus card and you get a Companion (or “2for1”) voucher which can save you hundreds of thousands of Avios depending on how you use it. Also, with the Gold card, if you spend £15,000 in the year, you get a bonus of 10,000 points.

If buying the car triggered the 2 for 1 voucher (which it of course will do unless you’ve triggered it already) or the additional points, then it might be worthwhile. That said, the Amex Gold option would only be 20,000 miles for a £300 spend (you’re paying 1.5p a point here), so still poor value. The BA Amex option could be 15,000 Avios plus a Companion voucher, which is certainly worth thinking about…

For my friend, the only option was the British Airways card and the voucher had already been triggered.

My rule of thumb to work out the value of Avios is to compare it to the cost of a return flight to Nice, a journey I make a few times a year. I do this because this is an actual value that I can get for the Avios as opposed to the ‘aspirational value’ for something that I wouldn’t pay for in cash, like a First Class ticket, or something I don’t really need, like an additional holiday.

A London – Nice flight will cost me 9,000 Avios and £35 (fees/taxes as a Reward Flight Saver) return. To get 2p/Avios, the flight would need to cost £215 – as I am usually able to get them for about £150 per person return, I would be getting less than 2p/Avios value.

Based on the above, my valuation is therefore around 1.3p per Avios, as follows:

• 150 (the Nice flight cost) minus 35 (the Reward Flight Saver) = 115
• 11500 (£115 in pennies) divided by 9000 (Avios redemption) is 1.27p

So, I am unlikely to touch any option that requires me to pay more than 1.3p for an Avios (and that is a fairly generous valuation of these points).

What would I do?

I thought about what I would do in this situation, as different people will have different priorities. I have spent enough for the British Airways 2for1 voucher so I could put it on to the Amex Gold as this would earn me 20,000 Membership Rewards points but, as noted above, it is probably still not worth it.

What I could do would be to put it on my IHG Rewards Club credit card as this would accrue two IHG Rewards points per pound. I value IHG Rewards points at around 0.4p each, so these 20,000 points are worth approximately £80: clearly not enough “rebate” to justify a 3% credit card fee!

However, the 20,000 points would also count towards my status. Personally I need about 30,000 points to reach Spire elite, which is the top tier of the IHG rewards club. Reaching this level would mean upgrades and other benefits in the hotel (plus potential status match opportunities elsewhere), which I think would be worth the additional payment.

It’s also worth noting at this point that the IHG credit cards are Mastercards: you may find that while there’s a substantial credit card fee for Amex, they are less (or non-existent) for Mastercard or Visa.

What would be the ideal scenario?

Obviously the ideal scenario would be if you didn’t have any of the cards, because you could split the purchase. It would be enough to trigger large bonuses on the British Airways Premium Plus card (26,000 Avios for £3k spend) and the American Express Gold card (22,000 Membership Rewards for 3k spend).

If you had the Amex Gold but not the BA Premium Plus Card, you would get 26,000 Avios for your bonus, 15,000 Avios for the spend and the 2for1 voucher (requires a £10k spend) in one fell swoop. 

What is the bottom line?

It is a very personal decision, and very much depends on your individual circumstances, which card you have, how far are you are towards any bonuses, and how much you value the points and, as has been shown, what you would do with them. It is excellent to see that my friend is considering all of the options but I would agree that for them, on this occasion, it is probably not worth it and paying in cash.