The Commonwealth Bank’s new Yello rewards scheme is playing favourites, and Virgin Australia is the winner. Here’s what the RBA’s surcharge ban means for CBA customers and why Qantas frequent flyers might come out worse off.
In 1966 a singer called Donovan, who hailed from Scotland, a country known for people who are careful with their money, sang a song called Mellow Yellow. Some of the lyrics of this song are noteworthy, as the CBA has announced a close tie up with Virgin’s Velocity rewards program at the expense of Qantas’s rival program with the banks’ new Yello scheme.
While this decision is great news for Virgin Australia and its shareholders, some CBA customers who fly with Qantas might not be so mellow about these Yello changes.
This CBA change has come out of changes forced on banks by the Reserve Bank of Australia. As of October 1 this year, our central bank has banned credit card surcharges, which historically have funded what the RBA says were perks that banks provided to make their credit cards attractive to certain customers, though not all customers.
The RBA was more interested in the latter rather than the former, and it wanted to stop merchants overcharging customers who used credit cards to buy stuff.
While this killjoy action should reduce what customers pay for using a credit card, it has been calculated that banks will lose about $660 million as a consequence of the ban.
The SMH’s Elias Visontay and Chris Zappone have looked at the implications of this Yello shift towards Virgin and have reported the following: “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.”
They also revealed important messages for CBA customers: “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.”
What does the RBA ban mean for credit card users? Here’s a list of the related changes banks have come up with as a reaction to the ban:
- Westpac has announced higher fees.
- Westpac has cut complimentary travel insurance.
- The bank has reduced card-linked benefits.
- Merchants have a cap on what they can charge when someone buys from them using a credit card.
- NAB has reduced the points earned on purchases.
- There could be reduced access to airport lounges.
- Other privileges, such as hotel stay extensions and cash-back of ride-shares, are set to be peeled back
- Bonus points for new sign-ups are set to fall.
While the CBA’s closer link to Virgin’s Velocity program implies the bank’s customers will get more from the deal, generally the RBA’s actions might reduce the overall costs of credit card usage for all users of this ‘fantastic plastic’ but those who were smart enough or well-off enough to benefit from the perks associated with their cards won’t be sending the RBA’s boss, Michele Bullock, a Christmas card this year.
And I suggest a number of CBA customers who are Qantas fans might not be so mellow about Yello! But I guess that’s life in the flying high lane.
