And of course we all know who paus merchants costs in the end......

The BA Amex card is issued by AMEX directly (ie AMEX is both the card issuer and the payment scheme). As such, this type of arrangement falls outside of the EU interchange regulations and therefore the interchange fees paid by merchants remain considerably higher than for comparable transactions made on a typical VISA/MasterCard credit card product issued by a 3rd party. This protection from the EU interchange rules helps AMEX to be able to continue to offer the product with attractive terms whilst keeping it commercially viable.

By contrast, an AMEX card issued by a 3rd party - e.g. Lloyd’s Bank - is caught by the EU interchange regulations and therefore the fees paid by the cardholder have been increased, the products have been withdrawn and/or the level of rewards have cut back as the economics have been dramatically changed by the maximum 0.3% interchange rate earned in the post-EU interchange regulation world.

Ok apologies, it looks like the EU has been continuing to chip away at AMEX via its co-brand cards (including the BA cards) and seeking to bring them into the scope of the regulations. From the link AMEX has obviously been involved in a lengthy legal process with the EU and whilst it looks to have lost its case, it’s not 100% clear that this was definitely the end of the road. That said, AMEX has delayed the EU interchange impacts on itself for a few years versus Visa and Mastercard and so the long-term impacts on its products has probably not fully washed through yet. From most of the articles, they seem to suggest that the BA card with a big annual fee may be commercially viable but the free one is less likely to be so. Also bear in mind that the interchange is only 1 element of a card product’s economics - e.g. annual fee, interest bearing balances, credit losses, fraud losses, card usage outside of the EU where the fees (and hence income) is higher etc.. So it is possible that AMEX may still be able to make the product work commercially whereas the ‘AMEX issued via a 3rd party’ cards were pretty quickly pulled back as soon as the EU regulations initially took effect.

Based on how other airline affinity cards work, I assume that AMEX has a contractual agreement to buy Avios at a fixed price per point with BA and AMEX having joint commitments to generate business etc. and some form of a revenue sharing mechanism - so if AMEX is suffering as the card becomes less profitable, I would imagine BA will also be feeling some of the financial pain at some point.

Part of the Amex calculation will be about having direct marketing access to high earning customers - the card offers are not provided out of the kindness of their hearts, they are co-marketing deals with usually quite high end high margin retailers.

Similarly Amex will take a cut of the BA spend at the 3 avios rate.The fee is also part of the equation, £195 equates to 19,500 avios, so well over the £10k spend at the 1.5 rate. If someone is just spending £10K on the card to get the 241, then they are also mostly buying the avios at above cost and Amex pocket the transaction fees. It starts becoming more interesting when spend is well beyond £10K, but at that point the individual is high net worth probably and there are other means of getting a payback as discussed.

A 241 needs significant flying spend to be really valuable, and anyway the number of "free" avios generated by this is on the redemption side and nothing to do with Amex, so that will be a cost mostly borne by BA. You can't charge Amex for 140,000 avios because someone has had 15K avios and a 241 on credit card spend and combined them with another 125k to do a redemption.

And of course some people pay interest on credit card debt. Stupid, but true. And God bless these simpletons, I say, because they subsidise everyone else at 22.2% APR or whatever mad amount it is.

We've also seen fees increasing overnight, benefits curtailed, and churning stopped. Expect more of this on other cards.

Having said all this, the writing is absolutely on the wall for extra-curricular earnings, and a couple of years ago the equation was far better for Amex. This isn't bad news, as ultimately everyone pays for these points in terms of higher costs, and the EU rules are very good for consumers. As with any arbitrage opportunity, count on it disappearing tomorrow and max it out today.

I’m not an EU resident but my guess is you haven’t seen any prices drop since the capping of interchange fees. This benefits the retailers who no longer are paying 1%, 2%, 3% fees vs 0.3% fees today.