CBA punishes Qantas customers in reward points overhaul

Commonwealth Bank is pushing customers to spend their credit card rewards with Virgin’s Velocity scheme instead of Qantas Frequent Flyer points, as part of a dramatic overhaul of its loyalty program.

Under the scheme unveiled on Tuesday, customers wanting to convert points earned under the bank’s new “Yello” scheme to airline rewards will get more generous rates when cashing them in with Virgin’s Velocity program rather than Qantas Frequent Flyer.

The move has been driven by the Reserve Bank of Australia’s decision to ban, from October 1, credit card surcharges that had funded credit card perks. This also pushed Westpac to announce fee hikes and cuts to benefits such as free travel insurance on its credit card line-up on Monday.

Announcing the Yello-Virgin partnership, CBA would not reveal details of how many Yello points will be needed to redeem Virgin, Qantas and other brand loyalty points. Customers will only learn of their diminished Qantas points earning potential closer to the scheme’s effective date, also October 1 .

Among the changes, Commbank customers who bundle multiple products, such as a mortgage or term deposits, with the bank will earn more points than those who have one account. The bank hopes that encouraging customer loyalty will help pay for the scheme, as the sector grapples with a shortfall in revenue from card fees.

Angus Sullivan, head of the bank’s retail division, said the change would enable more customers to earn rewards.

“For the first time, more than nine million of our customers can earn points on the everyday banking they’re already doing – their home loan, savings, insurance and cards – and redeem them on the things that matter, from groceries, utility bills and fuel through to a well-earned holiday,” Sullivan said.

The Reserve Bank’s reforms include the surcharge ban and a cap on fees paid by merchants every time a shopper pays for something with a card, which is expected to cut banks’ revenue by $660 million a year.

On Monday, Westpac unveiled a tightening of its credit card program, including cutting complimentary travel insurance from October and hiking annual fees, cash advance and interest rates, while keeping points earning rates relatively stable.

In a similar move, NAB announced last month that it would cut the points earning rates on some of the cards it provides for other brands, including Bank of Queensland and Virgin Money, by up to 50 per cent.

From September 30, some of NAB’s own credit cards will have their points earning rates reduced by about a third.

Sources with knowledge of the Commonwealth Bank’s new scheme said Virgin offered the bank a better deal on Velocity points than Qantas did for Frequent Flyer points.