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CREDIT BY DEFAULT
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Writing a review of my main credit card provider has never really been high on my list of priorities, but something positive happened recently that prompted me to have a little think about a service that I usually take completely for granted. In fact, now that I think about it, acquiring the Lloyds TSB Airmiles Duo MasterCard and Amex ("the Duo") was something of a fait accompli.

I had been collecting Airmiles for a number of years when I received an offer of an Airmiles MasterCard, which I believe was originally backed by the Royal Bank of Scotland. I used that card successfully for a few years until Airmiles decided to ditch their own-brand service in favour of a tie-up with Lloyds TSB, who became the exclusive and only supplier of credit cards which offered Airmiles as a reward.

Existing Airmiles MasterCard account holders were pre-approved, so I filled in the short-form paperwork without much thought, and my new cards arrived shortly after the service switchover. However, despite such inauspicious beginnings, I have had a pretty good service relationship with Lloyds TSB.

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WHY THE AIRMILES DUO?
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First things first. Credit cards are great little tools if you are disciplined about how and when you use them and know how to maximise the advantages. There are a few things about credit cards which I am simply not interested in. The first one, surprisingly, is the annual percentage rate (APR) charged by the card.

For the record, the Duo features a variable APR of 15.9% per annum, which is neither the best nor the worst in the business - but it is fairly competitive. The reason for my ambivalence is simple - I always pay off my balance at the end of the month - a discipline instilled in me by my father - which makes the APR entirely redundant.

I am a great believer in what I call "situational spending". To me, this means that when I am at BP and Sainsbury, I will use a Nectar Amex to maximise the number of points I get, and at all other times, I will channel all of my day to day spending through the Duo to maximise my Airmiles. This is especially useful at places like Tesco and Shell, as both already have Airmiles programmes in place, effectively allowing me to double the number of points I can earn. In a typical year, I earn around 1,500 Airmiles by using the Duo.

However, it is important to note that each of the cards offers a different rate of return. The Duo MasterCard gives you a pitiful 1 Airmile for every £50 spent, which is barely worth the bother, but its sister card - the Amex - returns 1 Airmile for every £10 spent. As such, I only use the MasterCard when Amex is not accepted (and given the charges merchants have to put up with from the American giant, there are a fair few places that don't take them).

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CARD "BENEFITS"
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You get two cards with the Duo, but they have one credit limit between them (the maximum amount of which will be subject to your credit status). You also get one consolidated bill which clearly displays the transactions on each card and enough detail to be able to identify the transaction. However, one slight annoyance is that transactions entered into by any additional cardholders are not separately identified.

The card has no annual fee, but very few do these days, so that's neither here nor there. The balance transfer and interest free purchase promotions change on a regular basis, but you can expect to get three (3) to six (6) months interest free and pay a 3% fee (with no maximum) for any balances that are transferred, but in return, you do get a generous looking bonus of 150 Airmiles for every £1,000 you transfer across.

Sound good? Read on.

Credit card providers are notorious for giving with the right hand and taking with the left, so mind the small print - you lose your promotional rate if you make a single late payment (there is a massive difference between 0% APR on a £5k balance transfer, and the interest generated with the standard 15.9% APR). You also have to make at least £100 of purchases in the first three months for the rate to remain at 0%.

Slowly and carefully read that last sentence again. The alarms should be going off in your head - big time. Credit card providers will always apply your monthly payment to the lowest interest rate item FIRST. In this case, that means one of two things will happen:

(a) if you were to transfer £1,000 to the Duo and you fail to make a purchase in the first three months, you would lose the interest free deal - making the balance transfer period effectively just three months;

but - far more perniciously -

(b) if you make a £100 purchase to keep the interest free deal for another three months, each monthly payment you make will reduce the 0% balance first, leaving the £100 you charged to the card accumulating interest at 15.9% until you clear the less expensive £1000 balance.

Sneaky. Very sneaky - so make absolutely sure you know exactly what will be paid off first and how (the payment hierarchy is, to be fair, clearly set out on the back of each paper statement).

There is one other ongoing offer which doesn't have such strings attached and would suit those who don't need to transfer balances. You will get a time-limited voucher good for 1,500 Airmiles to redeem against travel if you apply and are accepted for the card, spend at least £10 on it, and book one night in an Airmiles hotel when you book your travel. I have just recently redeemed this offer for an overnight in Brussels and it is actually very good value (I stayed at the Jolly Hotels property on the Grand Sablon for £100 a night for two of us, with free travel on EuroStar).

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PAYMENT
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Payment is easy and painless (the method, not the amounts you owe obviously - that's always painful) and can be done by telephone, by direct debit each month, at a bank, by cheque or by direct payment from your on-line bank. In each case, you should make absolutely sure that cleared funds reach Lloyds TSB before the due date if you want to avoid late payment charges and added interest.

I typically pay through my on-line bank at least five working days before the due date. Your bill will helpfully include the due date, the minimum payment amount, your balance and remaining credit limit and an estimate of the following month's interest charges (should you choose to pay the minimum only).

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FRAUD PROTECTION
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One of the reasons I decided review the Duo was because of some recent fraud protection measures that came to my attention. I tried to book a flight to France and entered my card details on Air France's booking system which was based in the USA (a bit odd given the international relationship is still a bit frosty - but "needs must" in business I suppose).

The payment was declined and seconds later the phone rang. It was Lloyds automated fraud protection system calling to ask me if the transaction, as well as the four previous ones, all of which had happened in my town centre, were legitimate and authorised. Some may find this intrusive and over-fussy, but given my experiences with other providers, I actually welcomed the intervention.

I'd rather be inconvenienced than defrauded any day. Once I confirmed that all was OK, I was allowed to re-process the ticket transaction. This system has kicked in twice now, the previous time being at a petrol station in Cyprus that was on an alert list for suspicious cloning activity.

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CUSTOMER SERVICE
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On the few occasions I have called up to talk to an actual person, I have managed to get through quickly (but only after navigating a slightly painful automated system) with my queries dealt with by English-speaking staff who were both courteous and knowledgeable. I always have time for people who at least make an effort to pronounce my difficult "foreign" surname, and I find that foreign call centres seem to do it better than domestic. In any event, it's ever so nice to know that, while they may be fleecing you blind, at least they are being polite and civilised about it.

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THE FINE PRINT
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The Interest Free period on purchases, if the balance paid in full, is fifty-six (56) days. There is a three percent (3%) charge for cash withdrawals with a minimum charge of £2.50 per withdrawal. In addition, the APR for cash withdrawals is close to a whopping twenty-eight percent (28%) and given they are the very LAST items to be paid off (after balance transfers and purchases) you will be stung quite badly if you fail to pay off the balance in full at the end of the month.

There is an additional 2.95% charge on the total sterling amount of transactions carried out on a foreign currency, which makes this an expensive card to use on foreign holidays. Once again, Lloyds TSB try and sweeten the deal by offering double Airmiles if you use the cards abroad, ostensibly hoping to catch out those who don't bother with the small print.

For the record, late payment fees are fixed at £12, but that does not include the interest you will be stung for as well. Credit card cheques are available, but also a bad idea given their order of payment and the 3% handling charge.

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VERDICT
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After all that, you may wonder why I still use the card. Simply put, I am disciplined enough to use it "situationally" to maximise the Airmiles that I earn. This tactical spending - mainly on the Amex card - has earned free flights for my family (previously three, now four with Baby H joining the fold) to Cyprus every summer - flights that would have cost upwards of £750.

In my case, the so-called other "benefits" and features the Duo offers are largely irrelevant, and can be safely ignored. As such, unless you have broadly the same aims and can be disciplined about its use, I would give this card a wide berth. Not recommended for anyone other than avid Airmiles collectors.

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POSTSCRIPT
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The good news for consumers is that the government, in a surprising episode of lucidity and common sense, is considering legislation that would make the so-called "negative payment hierarchy" of payments - i.e. allowing the credit card providers to pay off the cheapest debt first - a thing of the past. However, don't expect changes overnight - the finance industry has one of the most powerful lobbies in the City - so the best protection, as always, is to make sure you know what you are getting yourself into.

© Hishyeness 2010