Why Virgin Velocity points owners may want to sit tight

Why Virgin Velocity points owners may want to sit tight

It’s been a very difficult month for Virgin Australia, as the Australian airline stood down 8,000 workers and announced it would go into voluntary administration on the back of the COVID-19 crisis.

While it is indeed a terrible situation for any affected, if you're reliant on Virgin Velocity points, you're affected, as well.

With a question mark looming over Virgin Australia and the airline on shaky ground, the chance of using any points gleaned from rewards systems begins to disappear into the sky with each passing day.

State of play for your Velocity points

As it stands, Virgin Australia was placed into administration but Velocity, a separate entity that is wholly owned by Virgin Australia, was not.

It was revealed that Virgin Australia owed $5.3 billion to creditors, including clients like travel agents and bondholders.

In Virgin Australia’s last annual report, the full value of Velocity points came in at $497.1 million. However, The Australian Financial Review (AFR) revealed that the trust Velocity holds its points in had lent around $200 million in secured loans to Virgin Australia . This “raised questions” around whether there were “enough funds in the trust to cover the full value of the points”, the AFR reported.

On the 21st April, Velocity frequent flyer customers were sent an email stating that Velocity was still operating, but it would be pausing all point redemptions for an “initial period of four weeks”. Customers were reassured that their points “weren’t going anywhere” and would not expire through this period.

For card customers, you’ll still be able to earn points through your spending, although you won’t be able to redeem them at this time.

Velocity customers may be asking themselves what will happen to their points as they wait on bated breath for them to be redeemable again.

Experts weigh in on Virgin Velocity points cards

Steve Hui, Founder of iFlyFlat, wrote about the future of Velocity points for frequent flyer credit card holders.

“Virgin Australia's Velocity Frequent Flyer program will survive, but members should expect their points to be worth less once a new owner is found for the airline,” said Mr Hui.
“The points are likely to be honoured in some form as the new owners want to retain the business's customers and get off to a good start.
“In the event that the airline is liquidated (worst case scenario) Velocity members could still expect some compensation,” said Mr Hui.

Many Velocity Points credit card holders may be wondering what they can do right now. In an interview with RateCity, Steve Hui said they have two possible options.

“Velocity co-brand credit card holders should wait or contact their bank to see what options they have for them,” he said.
“Some banks have paused the transfer of points from credit cards to Velocity. So those cards which earn Velocity directly, they will have other options.
“It is better to change to a credit card that first accumulate ‘Rewards Points’ with the card, which then you can select to transfer to an airline at a later date. Examples such as AMEX membership reward points, Amplify points, ANZ points etc.”

RateCity Research Director, Sally Tindall, said: “While Velocity has confirmed points are safe, it’s not yet clear what the program will look like on the other side of the pause.

“While a lot of people will sit tight, others might decide they’re not going to be travelling as much and don’t need a frequent flier card,” she said.

There are still actions credit card holders can take right now, according to Ms Tindall.

“Now is a good time to do a health check on your credit card, especially if your annual fee is due soon. Big spenders might find their rewards card is still working in their favour, while others might realise they’re better off switching to a low rate, low fee card without the bells and whistles.
"However, moving to a different credit card might not be that easy in this environment," she cautioned.
"Some companies have stopped taking credit card applications while anyone who’s lost their job might find they can’t get a new credit card application across the line. If that’s you, call your current provider and see if they can switch you to a low rate card, especially if you’ve got money owing on it."

Alternative frequent flyer credit cards

Without a crystal ball, it’s difficult to predict exactly how long Velocity Points credit card holders may be waiting to redeem their points, or if they’ll still be worth the same value.

If you’re considering looking into alternative frequent flyer credit cards for a worst-case scenario, you’ll need to know who the other big players are.

The airlines offering frequent flyer points in Australia are:

Airline Program Name
Qantas Qantas Frequent Flyer
Jetstar Jetstar Dollars
Emirates Skywards
Virgin Australia Velocity Frequent Flyer

With Qantas being the largest airline in Australia by fleet size, international flights and international destinations, all of the big four banks offer customers Qantas frequent flyer credit cards.

Highest Qantas joining points bonus on credit cards

Company Card Annual Fee Purchase Rate Sign up FF Points Minimum income per year
Qantas Money Qantas Premier Titanium

$1,200

19.99

150,000

$200,000

NAB Qantas Rewards Signature

$395

19.99

130,000

-
ANZ Frequent Flyer Black

$425

20.24

120,000

-
Qantas Money Qantas Premier Platinum

$299

19.99

80,000

$35,000

Data accurate as of 29.04.2020. 

In terms of Qantas joining points bonuses for new customers, the highest offerings on the market from card providers are anywhere from 80,000 to 150,000 Qantas points. But there are catches.

RateCity analysis found that the highest joining points bonus for Qantas frequent flyer credit cards was for the Qantas Money Qantas Premier Titanium. However, as the name suggests, this is a premium card with a minimum income requirement of $200k and an annual fee of $1,200 – the highest on the market.

There may be expensive hoops to jump through with any frequent flyer credit card you’re considering applying too, including annual fees and high minimum income requirements. Be sure you read a card’s terms and conditions, as well as the Product Disclosure Statement, for a full break down of these costs before you consider applying.

Big four banks’ Qantas frequent flyer credit cards

ANZ Purchase Rate (%) Annual Fee
Frequent Flyer

20.24

$95

Frequent Flyer Platinum

20.24

$495

Frequent Flyer Black

20.24

$295

     
NAB Purchase Rate (%) Annual Fee
Qantas Rewards Premium Card

19.99

$250

Qantas Rewards Signature Card

19.99

$395

     
CBA Purchase Rate (%) Annual Fee
Commbank Ultimate Awards Credit Card with Qantas Frequent Flyer Direct

20.24

$30

Commbank Diamond Awards Credit Card with Qantas Frequent Flyer Direct

20.24

$379

Commbank Platinum Awards Credit Card with Qantas Frequent Flyer Direct

20.24

$279

Commbank Awards Credit with Qantas Frequent Flyer Direct

20.24

$89

*Qantas Frequent Flyer Direct allows you to opt in for $30 and convert CBA Award Points to Qantas FF Points
     
Westpac Purchase Rate (%) Annual Fee
Altitude Platinum Qantas Points

20.49

$200

Altitude Black Qantas Points

20.49

$300

Data accurate as of 29.04.2020.

RateCity analysis has found that NAB offers the lowest purchase rate for a Qantas frequent flyer credit card at 19.99 per cent.

Further, if you’re looking to avoid fees, Commbank’s Ultimate Awards credit card has the lowest annual fee ($30) of big four bank credit cards connected to Qantas.

Is now the right time to take action?

Keep in mind that taking out a second credit card or moving to a lower rate card during the COVID-19 crisis and recession may be a difficult endeavour. Banks like Macquarie are not approving new credit card applications at the moment, and a second credit card can affect loan chances.

Before you apply, consider if this is the best time to take out a new credit card. If you’re struggling with debt, or if you’re facing issues with employment or your income, it may not be the wisest time.

Look at your budget and map out to see if you could afford a new credit card’s fees and costs right now. Doing some research around alternative options as a worst-case scenario may help you feel better prepared for the future.

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Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

How do I apply for a credit card online?

Monthly repayment

This is how much you can afford to pay on a monthly basis off your credit card. You can enter any amount you wish; but to make the balance transfer worthwhile the default is $200.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

How do you cancel a credit card?

It’s important to cancel your old cards to avoid any additional fees. Unless you’re doing a balance transfer, you’ll need to pay the outstanding balance before you cancel your credit card. If you’ve opted for a card with reward points, make sure you redeem or transfer the points before you close your account. To avoid any bounced payments and save yourself an admin headache, redirect all your direct debits to a new card or account. Once you’ve done all the preparation, call your bank or credit card provider to get the cancellation underway. Once you receive a confirmation letter, destroy your card and make sure the numbers aren’t legible.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

Increase your credit card limit with Westpac

A credit card can be a useful tool to access extra cash when you need it. Sometimes you may wish to increase your credit card limit for greater financial flexibility. For example, to realize your immediate goals faster, such as planning for an international holiday or making a big purchase.

You can apply to increase your credit limit at any time, and most credit card providers have made it really easy to do so. You can use your online banking portal, the credit card provider’s mobile app, or even the telephone. 

Applying online to increase your credit limit with Westpac is the easiest option if you’ve already activated Westpac Live Online Banking. All you need to do is fill in the required information and then hit ‘submit’ to apply for an increase in your credit card limit.

Most banks will ask for details of your financial situation at the time of applying for a credit increase. This is done to ensure your new limit meets the lender’s criteria. 

You can apply for increasing your credit limit in any of the following ways:

  1. Visiting your nearest Westpac branch
  2. Calling Westpac on 1300 651 089
  3. Logging in on Westpac Live Online Banking

What's the best credit card for rewards?

There is no one-size-fits-all best rewards credit card. It's best you research what type of rewards program you'd like, as well as the fees, interest rate and conditions associated with those types of cards before making a choice. 

Rewards credit cards can also come with high annual fees that may end up nullifying the rewards, so think how often you use the card to decide whether the benefits outweigh the extra cost for you. A card with a lower annual fee might require a lot of spending to get any useful rewards, while another card with a higher annual fee might need fewer purchases to get a reward. 

Which credit card has the highest annual percentage rate?

The credit card market changes all the time, so the credit card with the highest annual percentage rate is also liable to change.

Keep in mind that credit card interest rates are expressed as a yearly rate, or annual percentage rate (APR). A low APR is generally good but also consider:

  • There can be different APR's for each feature of the card (e.g. purchases may have an APR of 14 per cent, while cash advances on same card could have an APR of 17 per cent.
  • Credit cards with a variable rate can change throughout the year, affecting your APR, so check the full details.
  • If you pay your balance in full every month, having the lowest APR is not as important as the other fees associated with the card. However, if you carry a balance from month to month, then you want the lowest APR possible.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.