I want a savings account that earns points, not interest, maybe
Could the Virgin Atlantic model take off elsewhere?
I earn most of my frequent flyer points from flights, credit cards, wine and the canny exploitation of supermarket rewards. That said, I'm always open to new ways to earn points, provided they make financial sense. (Not all of them do for me, as I've noted before with home loans that earn points.)
So I was interested when my Points Finder colleague Marc Terrano highlighted the UK example of the Virgin Atlantic 1 Year Flying Club Savings Account, which pays interest in Virgin Atlantic Flying Club miles, rather than cash. Could we see such a model take off in Australia?
The Virgin account launched in mid-2018. For each £1,000 you save for a year, you'll receive 1,600 miles. Virgin calculates that this is equivalent to an interest rate of 1.36%. (Note you can't touch your cash during those 12 months.)
Two immediate observations:
- That's not a very impressive rate of interest. In Australia, I could easily find a high-interest savings account that paid more than double that. Rates from different countries aren't directly comparable, but a quick check with my Finder UK colleagues confirms that 1.36% is definitely on the low side.
- Virgin calculates that to buy the equivalent number of points, you'd need an account that earned at least 2.40% per annum. Those accounts seem quite common, so this does come across as more of a novelty play.
Could we see a similar deal in Australia? We know, for instance, that Qantas is looking to expand into more financial services this year. I've previously speculated that savings accounts don't seem a very likely part of that mix, but the Virgin example suggests it's not impossible.
To be worth considering though, the points earned would need to beat out the interest rate. Buying 1,000 points from Qantas directly costs $49. To earn $49 in interest in a 3% savings account over a year, I'd need to deposit $1,700 at the start.
So if Qantas came out with a "1,000 Qantas points for every $1,000 saved for a year" deal, I'd be tempted. But if it was "500 points for every $1,000 saved for a year", I'd be better off just choosing a conventional savings account.
As with any points deal, you have to do the maths first.
Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on Finder.