While consumers are used to the idea of using a credit card to accrue airmiles, Virgin Money has launched a different way to earn – through a savings account.
The bank has partnered with long-haul carrier and namesake, Virgin Atlantic, to offer the Virgin Atlantic One Year Flying Club Savings account. The account – a one-year fixed saver – pays an effective rate of 1.19% on between £1 to £1 million but instead of the interest being paid as cash, it will be converted into Flying Club miles.
For every £1,000 saved, you’ll accrue 1,400 miles. If you accrue 3,000 miles, that’s enough for a discount on a flight. Save £15,000, and you would accrue enough miles for a return economy ticket from the UK to New York. Comparatively, Virgin Money says that to purchase the same number of miles you’d need a relative interest rate of 2.1% on your money.
Rhian Emmanuel, director of savings at Virgin Money comments: “The new Flying Club Savings account is the first of its kind and is a brilliant option for savers looking to gain more value from their cash deposits.”
Oli Byers, senior vice president, sales and customer loyalty manager at Virgin Atlantic adds: “We know how important earning Flying Club miles is to our customers and this innovative account is a great addition to our partnership with Virgin Money and follows on from the successful launch of our new Reward and Reward+ credit cards earlier this year.”
How does it compare?
It is tricky to compare this product as what it offers is unique – earning miles on savings instead of earning them from spending.
However, when it comes to savings rates, the best buy for a one-year fixed rate is 2.05% from Atom Bank. So if you put £15,000 away for a year you’d accrue nearly enough interest to pay for that flight to New York in cash.
Comparing the effective savings rate with the Virgin Atlantic Reward+ card (63.9% APR), you’d need to spend £13,350 to earn enough miles for a return economy flight to New York – less than the £15,000 with the savings account. But this card comes with a £160 annual fee. Meanwhile, you’d need to spend a whopping £26,000 on the Virgin Atlantic Reward card (22.9% APR) to earn the same return flight.
The Moneywise verdict
While this product is very eye-catching, the variables of buying flights means that you could potentially get a better flight price elsewhere. Airmiles schemes by their very nature are loyalty-rewarding, locking you into getting a flight with a particular airline. If you keep your lump sum in an account that pays a good rate of interest you can use that cash as you please, whether buying a flight, compounding the interest, or something else.
The benefit of accruing airmiles while spending on a reward card is that you are gaining benefits on top of a financial activity that doesn’t otherwise bring any extra perks. For that reason, credit cards that offer miles as rewards are more useful if your goal is to earn free flights each year.
To find out more about airline cards, read our guide to how far you can fly.