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“Indefensible”: CHOICE on exorbitant frequent flyer credit card rates

Consumer advocate calls on banks to drop interest rates on frequent flyer credit cards.

"While the banks' response to customers affected by COVID-19 has been commendable to date, more work needs to be done to make credit cards fairer, especially frequent flyer cards," says CHOICE banking expert Patrick Veyret.

"Virgin Australia remains in voluntary administration and its Velocity program remains essentially frozen. The value of Virgin Velocity points remains in limbo. It's simply indefensible that banks continue to charge people interest rates in excess of 20% on Velocity frequent flyer cards. While the value of the Virgin program is in jeopardy, the interest rates on these credit cards must be capped at 10%," says Mr Veyret.

See also: CHOICE analysis of reward program COVID-19 responses: choice.com.au/TravelRewards2020

"While many of the banks have ceased selling new Virgin Velocity credit cards, existing card holders face high interest rates up to 20.74% in legacy Virgin products. There has been no relief for existing Virgin velocity credit card cardholders," says Mr Veyret.

"Banks market their rewards programs to lure people into purchasing expensive credit cards, often using the trap of 0% balance transfers. Banks justify their exorbitant interest rates and fees by pointing to perks like access to frequent flyer programs. However, a recent CHOICE investigation found that many frequent flyer credit cards are simply not worth it. This is even more so now with the future of the Virgin Velocity program under question," says Mr Veyret.

CHOICE is calling on to banks to cap interest rates at 10% for all credit cards on the market.

"Velocity frequent flyer credit cards are simply the tip of the iceberg. The cash rate is at an historic low of 0.25%. There is no justification for the big banks to continue charging interest rates in excess of 20%. Interest rates on all credit cards must be capped at 10%," says Mr Veyret.

"Virgin's announcements to date have brought little relief to their members. Velocity members are still in the dark about whether they will be able to redeem points to spend on many of the advertised rewards, such as the Virgin Rewards Store. What's more, Virgin has remained silent on whether people's points will be devalued as a result of the voluntary administration," says Veyret.

Media contact: Katelyn Cameron, media@choice.com.au, 0430 172 669

Virgin Velocity credit cards on the market:

(Available as an embeddable infographic: https://infogram.com/request-for-banks-to-cap-interest-rates-online-1ho16veqdpdv2nq?live )

Bank

Card

Variable interest rates (p.a.) – Purchases

Annual fees

National Australia Bank

Velocity Rewards Premium

19.99%

$150

National Australia Bank

Velocity Rewards

19.99%

$95

Westpac

'Altitude Velocity' Platinum

20.49%

$150

Westpac 

'Altitude Velocity' Black

20.49%

$250

American Express

Velocity Platinum

20.74%

$375

American Express

Velocity Escape

20.74%

$0

Virgin Money (Bank of Queensland)

Higher Flyer Card

20.74%

$289

Virgin Money (Bank of Queensland

Flyer Card

20.74%

$64 for the first year, $129 thereafter

*Note all the above have cancelled new applications but existing cardholders continue to be charged these rates