In Sydney recently, for the launch of two new credit cards and a savings account for Virgin Money, Sir Richard Branson had the following to say:
“Virgin Money is here to make all Australians better off. Today we’re launching the first in a range of new products starting with two credit cards and an online savings account“ all of which are best in class. There is no better time to offer Australians a genuine alternative with simple and fairly priced banking products in an industry where there’s less competition today than ever before. This is classic Virgin territory,”
“Yes, Australia steered itself superbly through the Global Financial Crisis, but unfortunately this came at a price: the elimination of genuine choice. The finance sector in Australia has become highly consolidated and is now dominated by the Big Four, which results in the average Aussie getting less choice.”
Yawn. The second time around the gloss or the shine of Sir Richard’s Virgin brand seems to have become a little tarnished. I mean all the words are there, the sexy young things are there and the fantastic deals are there. Whoa back up there a minute, the fantastic deals? Hmm might check the detail a bit later on that one.
For those that aren’t too old you might recall a similar launch of a Virgin credit card in 2003. Remember it came in a choice of 5 colours and had one corner rounded to make sure you knew they were different? The last Virgin credit card was issued in April 2008. Apparently it wasn’t profitable so Virgin cancelled the card and the 500,000 plus card holders were forced to either accept the replacement card offered by Westpac (Westpac Ignite) or go elsewhere.
Sir Richard says there’s less competition in the market today. Well duh, when the going got tough, you left sport! You might also recall you sold your old Virgin customers to Westpac?
Why did Virgin leave and will they leave again?
The original products were essentially Virgin badged Westpac products. The original agreement with Westpac ran for 5 years, at the end of which Virgin accepted a short term deal whereby they sold ownership of the customers to Westpac. Valued customers? Too right, you were valued at $39 million or about $78 each. The main reason for leaving would appear to be the lack of profits and the end of that agreement.
The latest products are backed by Citibank under a 10 year deal. You should be worth at least $150 at the end of that deal. Let’s hope at the end of that agreement the card is profitable and a new ongoing agreement is put in place in good time before it comes to an end.
Low Rate and No Annual Fee Credit Cards
The biggest selling point of the Virgin No Annual Fee Credit Card is of course the no annual fee. However, if you actually do use it and rollover any outstanding balances from month to month then despite the lack of an annual fee your fees will add up pretty fast by virtue of the ordinary interest rate.
| Name | Interest Rate | Balance Transfer | Max Interest Free Days | Annual Fee |
|---|---|---|---|---|
| Virgin No Annual Fee Credit Card | 16.95% | 2.9% for 6 mths | 44 | $0 |
| Westpac Ignite* | 14.24% | n/a | 55 | $0 |
| ANZ Low Interest Rate | 13.24% | 2.9% for 12mths | 55 | $58 |
| CBA Low Interest | 13.24% | n/a | 55 | $78 |
| NAB Low Rate Visa | 13.24% | 4.99% for 5 mths | $49 | |
| Westpac Low Rate Visa or MasterCard | 13.24% | 3.99% for 6 mths | 55 | $45 |
| BankWest Lite MasterCard | 10.75% | 1.99% for 9 mths | 55 | $59 |
* This is the Westpac credit card to which the old Virgin credit card holders were transferred when Virgin quit the credit card market in Australia in 2008. Unfortunately, it is not open to new applications.
No Annual Fee Credit Cards
If you do really want a no annual fee credit card then there are other offerings from outside the big four banks, despite what Virgin would have you believe.
| Name | Interest Rate | Balance Transfer | Max Interest Free Days | Annual Fee |
|---|---|---|---|---|
| Virgin No Annual Fee Credit Card | 16.95% | 2.9% for 6 mths | 44 | $0 |
| BankWest Zero MasterCard | 16.99% | n/a | 55 | $0 |
| HSBC Credit Card | 16.99% | n/a | 55 | $0 |
Airline Credit Cards
Virgin’s main competitor in the airline market is Jetstar. Let’s compare the two offerings and a Velocity card from NAB.
| Name | Interest Rate | Balance Transfer | Max Interest Free Days | Annual Fee |
|---|---|---|---|---|
| Virgin Flyer Credit Card | 20.99% | 6.9% for 6 mths | 44 | $99 |
| Jetstar MasterCard | 11.99% | 0% for 6 mths | 55 | $49 |
| Velocity NAB Standard Card | 19.99% | 4.99% for 6 mths | 44 | $65 |
Whoa on the face of it the Jetstar credit card gives the Virgin a flogging. The interest rate, annual fee, interest free days and balance transfer offer are all better on the Jetstar card.
Pink Credit Card
Unfortunately Virgin isn’t offering a pink credit card option this time around. However, you can have a pink credit card thanks to NAB Low Rate Visa.
Savings Accounts
A ha at last some clear sky for Virgin. The Virgin Savings Account, Virgin Saver beats all of the Big 4 banks with their offering based on interest rates. Just to be sure lets take a closer look. Yep all four of the big banks have inferior promotional and standard interest rates. If it wasn’t for NAB owning UBank, Virgin Money could claim this round too. Whilst Virgin are offering a promotional interest rate that is similar to the interest rate on home loans (a clearly unsustainable strategy), the UBank standard rate is clearly superior.
| Name | Promotional Interest Rate | Standard Interest Rate | Details |
|---|---|---|---|
| Virgin Saver | 6.51% | 5.35% | for first 4 mths |
| ANZ Online Saver | 1.90% | 0.60% | until 31/12/10 if you apply before 31/8/10 |
| CBA NetBank Saver | 3.00% | 1.10% | until 30/11/10 |
| NAB iSaver | 3.00% | 1.10% | for 4 mths |
| Westpac eSaver | 2.85% | 0.85% | for 4 mths |
| UBank USaver | 3.35% | 0.10% | you must set up regular savings of $200 pm into acct to get bonus rate |
Conclusion
Now I like Sir Richard, even if he is a Pom nice Englishman and takes his profits overseas, it’s rare to hear him whinge. I reckon, if you invited him over for a BBQ, he’d bring some nice looking people for a swinging good time. However, if you want good value from your financial products have a look around before buying this tired old Virgin marketing exercise that’s been around the blocks before.
Disclaimer: Financial product details such as interest rates and fees change without notice. Please confirm all details with the product provider before taking any action. If you need advice you would be wise to consult a Financial Planner.