Commonwealth Bank is overhauling its credit card rewards program in a move that sees the bank favour Virgin Australia’s Velocity program over the Qantas Frequent Flyer point program. 

The new plans will make it harder and more expensive for customers to earn Qantas Frequent Flyer points, while giving Virgin Australia’s Velocity program a significant boost.

From October 1, CBA customers will be able to earn points via a refreshed Yello rewards program across a range of banking products, including credit cards, transaction accounts, home loans, term deposits and insurance.

The changes come as the banking industry prepares for changes to interchange fees and the removal of card surcharges. Announced by the Reserve Bank of Australia, these reforms are expected to reduce the revenue available to banks for funding rewards programs.

Under the new system, CBA’s existing credit card rewards will be shifted into Yello. Customers will be able to redeem points for products and services such as fuel, groceries and travel, as well as transfer points to selected airline and loyalty programs.

For Qantas customers, the changes mean a reduction in value.

New CBA credit cards will not directly earn Qantas Frequent Flyer points. Existing cardholders will continue to earn Qantas points, but at a reduced rate of 0.5 Qantas points per dollar spent.

Customers wanting to transfer their new Yello points to Qantas will receive one Qantas Frequent Flyer point for every three Yello points, while also paying a $149 annual fee.

By comparison, CBA has struck a substantially more favourable deal with Virgin Australia’s Velocity Frequent Flyer program. Customers will be able to transfer 2.5 Yello points into one Velocity point, with no transfer fee initially. The bank is also offering a 20% bonus on Velocity transfers during the first six months.

The changes could mark a significant shift in the Australian credit-card rewards market, in which Qantas has traditionally had strong relationships with major banks.

Other airline partners CBA customers will be able to transfer Yello points to include Qatar Airways, Myer and Woolworths Everyday Rewards, which is connected to Qantas.

According to CBA, the new Yello program is designed to reward customers for their relationship with the bank, beyond simply their credit card spending.

Customers will fall under a range of different tiers, with higher-tiers earning more points. 

CBA has more than nine million customers, giving the revamped rewards program considerable reach. The bank says additional partnerships are expected to be announced next year, including two international airlines, a major hotel chain and another Australian loyalty program.

The changes may mean those who stayed with CBA for its Qantas points program may re-evaluate their banking. For Velocity members, however, the new arrangement is an expansion in points-earning potential.