Frequent Flyer Credit Card Alternatives To Velocity Cards

Virgin Australia has gone into voluntary administration, leaving many Velocity account members and credit card holders wondering what will happen to their frequent flyer points. While we wait to hear if a rescue package will emerge for the airline, there are some options that may be available to these consumers.

What happens to Velocity points after Virgin's collapse — Virgin is in voluntary administration. What does this mean for your Velocity points and frequent flyer credit card? Image source: jax10289, Shutterstock.

The airline announced on Tuesday it had gone into voluntary administration, after the Virgin board was confronted with the risk of continuing operations with nearly $5 billion in debt that needed to be repaid and no bailout in sight from the federal government.

Virgin’s fate had looked increasingly uncertain in recent weeks, as the economic fallout and travel restrictions associated with the coronavirus pandemic weighed heavily on airline operations.

While Virgin’s administrators, Deloitte, are working hard to target private investment in an attempt to revive the company as quickly as possible, there are around 10,000 employees of Virgin Australia and a further 6,000 contractors whose jobs are hanging in the balance.

Frequent flyers – more than 10 million of whom are Velocity members – are now also facing uncertainty as to what will happen to their frequent flyer points earned through the program and through spending on credit cards linked to Velocity’s Frequent Flyer rewards scheme.

A Virgin spokesperson reportedly told Business Insider Australia on Wednesday that a trust containing special cash reserves would protect customers’ points and mean “members will never just lose points”, but did not clarify how much compensation members could receive or how the points would be valued if the airline was liquidated.

Velocity sent a notice to members on Tuesday, advising it had made the decision to pause all point redemptions for at least four weeks, meaning members would not be able to redeem their points for flights or on items such as gift cards, electronic goods and wine from the Velocity Rewards Store during that time. It noted this timeline could be extended further, if needed.

Velocity is owned by Virgin Australia but is a separate company which is not in administration. This means it is still operating, albeit under these altered conditions for the time being.

In the statement to customers, the frequent flyer business promised members “your points aren’t going anywhere” and that “they will remain in your account”. Of course, it is not in a position to say whether points will in the future be redeemable for flights, which is where points return tends to be maximised.

Velocity also said existing points would not expire during the pause and customers could continue to earn points with its partners, but would not be able to redeem them until the pause was lifted.

Canstar finance expert Steve Mickenbecker said while it’s possible a rescue package could emerge for Virgin, even if it doesn’t, Velocity could still potentially survive as a rewards scheme.

“Velocity could survive independent of an airline, just as programs like Flybuys and Woolworths Rewards do, and it could even be bought by one of those companies or another retailer,” Mr Mickenbecker said. “So, points can be worth something as it stands,” he added.

Then there’s the issue of credit cards and the Velocity rewards points that are linked to many of them.

Credit card issuers including ANZ, American Express, Bank of Queensland, HSBC and National Australia Bank have reportedly now blocked the transfer of credit card reward points to Velocity Frequent Flyer points following the announcement of Virgin’s entry into voluntary administration.

Credit card holders whose rewards programs exclusively earn Velocity points are faced with a similar decision – do they continue to earn points on that card or choose another option? Many providers offer a card linked to Qantas as well as a card linked to Velocity, and there is a wide choice of cards and rewards.

Mr Mickenbecker observed that “the only certainty at the moment is that the world will be different coming out of COVID-19 and it could be that there will be changes to more than one loyalty program”.

In addition to credit cards linked to Velocity, Canstar’s database of frequent flyer credit cards lists a number of options that may be of interest to rewards-chasers, including cards with low annual fees, as well as competitive points earn rates and sign-up bonuses.

5-Star Rated Frequent Flyer Cards with Direct Earn Qantas Points
Provider	Card	Net Reward Return*	Annual Fee	Standard Qantas Point Earn Rate per $1 Spent
American Express	David Jones Platinum Card – Qantas	$845.32	$295	0.50
American Express	David Jones Card – Qantas Option	$841.39	$99	0.50
Commonwealth Bank	Ultimate Awards – Qantas Option	$611.12	$420 or $0^	0.40
HSBC	Platinum Qantas Credit Card	$405.08	$99	1.00
American Express	Qantas Ultimate Card	$403.85	$450	1.25
Source: www.canstar.com.au – 22/04/2020. Based on 5-Star Rated personal frequent flyer credit cards in Canstar’s database. Products listed in descending order by Net Reward Return. *Net Reward Return is calculated by subtracting the estimated net cost of owning the credit card for 12 months, taking into account any annual fees and interest charged on accrued balances but excluding temporary, promotional fee waivers, from the dollar value of rewards earned. Star Ratings and Net Reward Returns based on Canstar’s April 2020 Rewards Credit Card Star Rating, for Qantas point-earning cards in the $36k annual spend frequent flyer profile. ^Pay no monthly fee if you spend at least $2,500 per statement period and choose to receive online statements; fee for this product treated as $0 in this example, assuming an equal spend amount per statement period.

5-Star Rated Rewards Cards (Non-Frequent Flyer) with the Highest Net Reward Return
Provider	Card	Net Reward Return*	Annual Fee
Commonwealth Bank	Ultimate Awards – Rewards Option	$375.14	$420 or $0^
American Express	David Jones Card – Rewards Option	$292.68	$99
Latitude Financial Services	Infinity Rewards Visa	$265.14	$69
Summerland Credit Union	Rewards Card	$257.26	$79 (waived first year)
Source: www.canstar.com.au – 22/04/2020. Based on 5-Star Rated personal rewards credit cards in Canstar’s database, that are available for new applications. Products listed in descending order by Net Reward Return. *Net Reward Return is calculated by subtracting the estimated net cost of owning the credit card for 12 months, taking into account any annual fees and interest charged on accrued balances but excluding temporary, promotional fee waivers, from the dollar value of rewards earned. Star Ratings and Net Reward Returns based on Canstar’s April 2020 Rewards Credit Card Star Rating, in the $36k annual spend profile. ^Pay no monthly fee if you spend at least $2,500 per statement period and choose to receive online statements; fee for this product treated as $0 in this example, assuming an equal spend amount per statement period.