Lloyds Bank is dramatically scaling back the benefits of its Avios Rewards credit card, cutting the number of Avios points existing customers can earn by up to two thirds and scrapping its free flight upgrade offer.

The Lloyds Avios Rewards credit card - which was was closed to new customers back in May - is a long-standing airline rewards credit card which has been available for years and has often featured as a top pick in our Airline Credit Cards guide.

Currently cardholders, who pay a £24 annual fee, have both an American Express and a Mastercard - the Amex card gives 1.25 Avios per £1 spent, while the Mastercard gives 0.25 Avios per £1 spent. You can also get a free flight upgrade each year you spend at least £7,000.

However over the next couple of months cardholders will be switched to a new Lloyds Avios Rewards offer which will replace both cards with a single new Mastercard paying just 2 Avios points per £5 spent. The free flight upgrade will be scrapped - though the annual fee will also disappear.

For many the new offer can be beaten by other cards, so you can ditch and switch. For our full roundup of credit cards offering rewards that you can use for free flights and more, see our Airline Credit Cards guide.

I'm an Avios Rewards cardholder - what do I need to know?

If you're an Avios Rewards cardholder you'll soon be issued with a single Mastercard which will replace both your existing cards - the scheme will continue to be called Lloyds Avios Rewards though.

The new card isn't available to new customers - it's only for existing cardholders. Here's how it works:

  • It pays 2 Avios points per £5 spent.
  • Existing cardholders who've also had a Club Lloyds current account for six months or more will also earn an additional 1 Avios for every £10 spent.
  • There's no longer any annual fee.
  • There's no longer any free flight upgrade voucher.
  • The new card will have a 2.95% foreign exchange fee.

The bank is in the process of writing to existing cardholders outlining the changes - we've asked when all cardholders will have been notified, and will update this story when we hear back. You'll receive your new Mastercard two months after receiving the bank's letter, though Lloyds says you will be able to continue using your old cards for a further 30 days after that.

All direct debits currently set up on your existing cards will be transferred across, but standing orders will need to be set up again. If you already have an Avios account, any Avios balance you have will remain.

Existing cardholders who have paid an annual fee within the last 12 months will have it refunded on a pro-rata basis - this will be credited to your credit card account.

How does the new card compare with the old version?

While the new Lloyds Avios Rewards card is fee-free, the rewards it offers are much less. Currently you can earn 6.25 Avios for every £5 spent on the Amex - this will drop to just 2 Avios on the new Mastercard.

The new card also comes without any flight upgrade offer. The current Lloyds Avios Rewards scheme offers a free flight upgrade voucher when you hit a £7,000 annual spend. The upgrade voucher can be used for a one category upgrade (except for Club to First), for either a return flight or two one-ways.

It's worth noting though that if you rarely use the Amex card currently, the new Mastercard will offer a slightly better return than the current Mastercard - 2 Avios per £5 spent vs 0.25 Avios per £1 spent.

You can earn much more with other Avios cards

If you're a Lloyds Avios Rewards cardholder it's worth checking if you can earn more Avios with another card. Here are our current top picks:

  • The fee-free BA Amex (eligibility calc / apply*) gives 5,000 bonus Avios points if you spend £1,000 within three months and a free companion flight ticket if you spend £20,000 in a year. Plus you earn 1 Avios point per £1 spent on the card. (22.9% rep APR).
  • Alternatively, the BA Premium Plus (eligibility calc / apply*) is an Amex which offers a much higher 25,000 Avios introductory bonus as long as you spend £3,000 within three months. You also earn 1.5 Avios per £1 spent on the card as well as a free companion flight ticket if you spend £10,000 in a year. However the card comes with a £195/year fee, so is only worth it for high spenders. (76% rep APR, incl fee)
  • For those not looking for an airline credit card, the Amex Gold (eligibility calc / apply*) gives 10,000 bonus Avios if you spend £2,000 within the first three months, plus 1 Avios point for every £1 spent on the card. There's a £140 annual fee, but it's waived for the first year so you can cancel before year two if you don't want to pay it. (57.6% rep APR incl fee).

As always, if you're are thinking about applying for a credit card, first use our eligibility calculator to check your chances of acceptance without harming your creditworthiness. Always ensure you repay IN FULL or the rep APRs will dwarf the Avios gain. For full info, see Airline Credit Cards.

It's worth noting all the above are American Express cards. If you don't want to rely on an Amex or would prefer a Mastercard instead - which is more widely accepted - then Lloyds' Avios card may be worth holding on to. If you aren't too concerned about earning Avios as such, our Reward credit card guide includes a host of the best Mastercards which pay cashback or rewards.

What does Lloyds Bank say?

Lloyds Bank told us its new Mastercard is "not yet available to new customers" - suggesting it may open applications to new customers in future.

The bank added: "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."