You’re a Shocker, Barefoot

Mr Pape,

Your ‘shock/horror’ credit card piece in the Sunday Times was one of the most irresponsible financial articles I have read for some time. My wife and I (73 and 78 years old respectively) have been using credit cards for everything since they came into existence. Each month we only have one bill to pay, and it is paid on time every month ‒ very convenient! A more positive article would have explained the virtues of credit cards and how to use them wisely.

Wayne

Hi Wayne,

You don’t seem to understand how this column works.

It’s not my job to explain the virtues of credit cards and how to use them wisely!

(I’ll leave that to Commbank, who teach this to nine-year-old kids who attend their schools education program.)

Now, you gave me a backhander by saying I wrote “one of the most irresponsible financial articles” you’ve read for a long time. (I can imagine the bankers reading this would be giving you a golf clap: “Hear, hear! Finally someone gave it to Barefoot! You’re a jolly good sport, Wayne old boy!”)

Well, let’s talk about financial irresponsibility:

As you know, the banks do their best to lure people, especially young people, into taking up credit cards.

The reason is obvious: while interest rates have fallen to an all-time low, the average credit card interest rates haven’t budged from 18% since Alan Border donned the Baggy Green.

Yet at least the original Bankcard didn’t have a membership fee. Annual fees on today’s credit cards have been increasing by more than 20% per annum to an average of $135 a pop, according to Canstar.

At the same time, the value of credit card rewards points have been slashed. Last year a report by comparison site Mozo found that they were virtually worthless, plummeting a staggering 96% since 2016.

Look, I get that some people ‒ like you ‒ pay off their cards on the due date and get a 55-day interest-free loan.

However, the truth is that for most people ‒ particularly the young and the vulnerable ‒ they’re a debt trap.

Wayne, it’s these people who are subsidising your interest-free loan. So who’s being financially irresponsible, sport?

Scott

The Great Australian Finance Experiment

My five-year-old son is obsessed with maths.

The other night he worked out that the maths app game we play each night is charging us a recurring fee.

He was ropeable: “You need to delete this game off the iPad, or we’ll keep getting billed. Do you understand, Dad?”

I nodded.

Chip off the old block.

Anyway, it wouldn’t surprise me if he eventually studies finance at university.

And if he does, he’ll almost certainly (as part of his ‘financial history’ class) look back at this monetary madness we’re living through in 2019.

I picture him coming back to the farm, scratching his head:

“Dad, what the hell were you guys thinking?

“The housing market was slowly deflating after the mother of all housing booms … but then you started cutting interest rates to almost zero?

“And at the same time you loosened lending criteria and encouraged young people to buy a home with just a 5% deposit?

“How did you think it would end?!”

Okay, so I’m putting it on record that I don’t think any of this is a good idea.

Yet I’m clearly in the minority: this week the media predictably cheered that the average homeowner would be $58 a month better off with the latest rate cut.

They’re missing the point.

Having to cut rates to the lowest levels in history ‒ with the promise of even more to come ‒ is a sign that we’re in deep trouble.

Rate cuts are supposed to act like cocaine … yet after this many hits, their effectiveness is wearing off. (The Verve sang it best: “Now the drugs don’t work, they just make you worse.”)

Just like I can’t fathom my father paying 20% on his home loan in the early nineties, I’m sure my son will be baffled by our rock bottom rates today. Either way, this is a massive financial experiment that we’ve all signed up to … and the effect could be felt for generations.

Tread Your Own Path!

Westpac Jackpot!

Dear Scott

I just wanted to say thank you! I received a letter from Westpac today to say that in response to my ‘query’ they have cancelled my credit card repayment insurance and refunded $1,100 in premiums paid over the past four years. Woohoo! One giant leap towards paying off and cancelling my card altogether!

Fiona

Hi Fiona,Ka-ching!

Since I wrote my column a few weeks ago, I’ve had heaps of Barefooters tell me they’ve got thousands of dollars back.

And if you, dear reader, have been sold junk add-on insurance, head over to demandarefund.com and stake your claim.

Scott

Introducing … Zuckbucks?

Facebook is set to launch its own crypto-currency next year, the BBC reported this week.

(The article referred to the new currency as ‘GlobalCoin’ … though I much prefer ‘Zuckbucks’.)

So, will this be yet another crazy crypto coin?

Not a chance!

My bet is that ‘Zuckbucks’ will be as boring as your Aunt Betty’s status updates.

See, Facebook is already lame (but incredibly lucrative), so they’re doubling down on something even lamer (and equally lucrative): payments.

And that’s because Facebook’s end game is to become the WeChat of the West.

Hang on … what’s WeChat?

It’s the Chinese version of Facebook, Instagram, Twitter, YouTube, Google. All rolled into one ‘super app’.

However, WeChat’s big dumpling is mobile payments. In China you can order a meal, split the bill with your mates, pay your share, and take a photo of your dish to impress your friends ‒ all on WeChat.

This immersive experience throws off a lot of personal data, and that is what Facebook really wants. Oh, and so does Google. And Apple. And Amazon. And thousands of tech companies that you and I have never heard of (yet).

Now think about your current humble little bank account.

Yes, you’ve got an app on your phone … but it still looks and feels pretty much the same as it did 20 years ago, right?

It’s all still BSBs and account numbers, and plastic cards you carry around with long numbers printed on them.

Well, ‘big tech’ is coming for your wallet … and our banks know they have one almighty battle on their hands.

It really began a few years ago when Apple Pay arrived with the promise of ditching your silly plastic card, and allowing you to make payments with your iPhone (in return for Apple sharing a clip of the transaction).

“Bugger off!” said the big banks.

The only problem was their customers wanted Apple Pay.

And so, one by one, they’ve each folded like a cheap card table: first ANZ, then the CBA (who announced this week they’re spending $5 billion on updating their tech to fend off tech competitors), and this week NAB.

And that leaves Westpac, who are gallantly continuing to produce their own ‘Apple lite’ white trash wearables, which they call ‘Centsitive Objects’.

(Geddit?)

Yet my all-time favourite banking bling is the Bankwest payment ring. No jokes. It’s really a thing (and yours for just $39!)

Here’s how Bankwest describes it:

“Our award-winning payment ring is as easy as tap & go – just grab the things you need, fist-bump the terminal and you’re done.”

(Yes, they really said that.)

This week Morgan Stanley estimated that the rapid take-up of smart wallets (payments on your phone) could cost Aussie banks $22 billion in lost revenue as the tech titans move in.

Fist bump to that!

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.

A Pig Gave me a Fridge Magnet!

The other day my son came home and announced he’d received a ‘present’ … from a stranger at the local park.

“A pig gave me a fridge magnet!” he squealed (as only a five-year-old can).

His younger brother picked up on the excitement and lunged for the prize. And then it was on for young and … slightly younger. All over a freaking fridge magnet. (Then again, that’s all part of the bro code.)

As I separated the two hay-balers, I saw that this was no ordinary fridge magnet.

The pig was actually … a local bank employee dressed up in a costume.

Which bank?

No, not that one.

This swine came from Bendigo Bank, and he was apparently the star attraction at the local community event … getting selfies with the kids. Now I’m sure there were some parents who were taking photos with the pig and having a lovely family time. But, as my kids would soon understand, I’m not like other parents ‒ I get a little intense when it comes to school banking.

For me it was like my son coming home with a packet of Marlboros:

“The cool cowboy gave it to me, Daddy … and a lighter!”

And wouldn’t you know it, the Bendigo Bank boar turned up at my son’s school with bank-branded bags, colouring books and pencils. At this point I’m breathing into a paper bag: if I see that corporate clown around town, I’ll put a skewer up his clacker and an apple in his mouth!

Okay, so I’m joking … but the fridge magnet went in the bin, thus reuniting the boys against a new enemy ‒ their old man: “So unfair, Dad!

Here’s the deal: for the last 15 years, I’ve just been carrying on like a pork chop about this issue.

And, thankfully, other people are finally starting to get their snouts out of shape about it.

Earlier this year  the Australian Education Union (AEU) wrote a letter to the federal Education Minister, Dan Tehan, demanding that banks be banned from classrooms. As AEU president Correna Haythorpe put it: “There’s no place for private corporations to go into schools and try and trap children into banking with them for the long-term future.”

You know what?

We need a financial revolution in this country, and it needs to start with our kids.

Oink! Oink!

Tread Your Own Path!

St George Bank Swanns Around

Hi Scott,

I am having all sorts of problems trying to cancel the credit card insurance that was added to my St George credit card when I first took it out. I was told that, as I was a single mum, I would not get the card without it. It is just under $90 per month! I cancelled it over a month ago and they are still debiting my card. St George say it’s not them and to call Swann Insurance, who say it’s not them. In the meantime it has overdrawn my account. Please help.

Louise

Hi Louise,

The St George Bank website says: “Please note Credit Card Protect is no longer sold.”Do you know why they’ve stopped selling it?

It’s not because for years it was known in the industry as ‘junk insurance’ and was hard-sold to unsuspecting customers. That’s exactly why they sold it in the first place ‒ they made a fortune out of it!

No, the reason the banks stopped flogging it is because it got the Royal Commission treatment, and, as a result, banks and insurance companies could be looking at stumping up more than $1 billion in refunds.

The Consumer Action Law Centre has set up a free website that makes it easy to claim: demandarefund.com

Yet you don’t have time to wait.

I can’t imagine how distressing this must be for you. You’re a struggling single parent, and you’ve done the right thing, but still had your account has been overdrawn over Easter ... and then probably been hit with more fees!

And it sounds like they’re giving you the run-around: I mean, who cares about a lowly single mother, right?

So let’s you and I take this to the top.

Ross Miller is the General Manager of St George Bank.

Here’s an old party trick: when you mention a bank executive’s name in print, it pops up in their media tracking service. Which means this column will soon land on his desk.

So, Ross Miller, I think you should refund this single mother all the outrageously expensive premiums she’s paid, plus any overdrawn fees or penalties.

Over to you, Ross Miller of St George Bank.

Scott

ING Is Not Ethical

Hi Scott,

Love your work. However, I was disappointed to see a news piece in the weekend paper about super funds being less than transparent about their ethics. I was also disappointed to discover that ING invests in coal. Saving money is important to me, but so is using my money ethically. So my question is: can you recommend a truly ethical super fund and bank? And could you consider taking ethics into account when you make recommendations?

Janice

Hi Janice,

Can I recommend an ethical super fund and bank?

No, I can’t.

It would be unethical of me to presuppose other people’s ethics.Some people are like you – they really care about the environment. Others couldn’t give a Clive Palmer.

My job is to educate, empower, and find the best deals without fear or favour.

Then you – the end user – should apply your own criteria.And that’s why I don’t rate ‘ethical’ or ‘socially responsible’ investments.

The article you mentioned cited research from an environmental group called Market Forces which found that some ethical super fund options, from the likes of Hostplus, CareSuper and AMP, don’t disclose the companies they invest in. For example, AMP’s ethical fund holds fossil fuel mining companies.

Then again, AMP argued that it ‘only represents 2% of the portfolio’.

Interesting rebuttal.

That’s like dating what you think is a straight-laced marrying type, only to find he’s just gone on a week-long crystal meth bender. “But I only get on the gear when my bro Tino is in town! It’s, like, 2% of my year. I’m totally legit 98% of the time, babe.”

Right.

My main tofu with ethical funds is not about what they invest in, but that the majority are ‘free range’ in how they charge. “A sizeable number of ‘sustainable’ funds produce sub-optimal returns at relatively high fee levels”, according to SuperRatings.

Personally, I’d rather invest in a low-cost fund and be tens of thousands of dollars better off. Then I can choose to donate the difference to causes that I care about.

Then again, they’re my ethics, not yours!

Scott

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are cheaper index super funds on offer. How do I know? Because my readers constantly email me about them! So before you do anything, go to YourSuper.gov.au and compare super funds first.

The fine print on Apple’s new credit card

Sir Richard Branson leaned across the table, smiled, and winked at me.

“It’s pretty sexy, right?”

In his hand was a credit card ‒ a Virgin credit card ‒ with an aesthetically revolutionary ‘clipped corner’.

That boozy night happened, from memory, about 16 years ago. At the time Branson was banging on about his card helping people, while simultaneously sticking it to the ‘fat cat banks’ (and making himself a boatload of cashola).

This week Apple announced it’s launching a credit card (only in the US to begin with), simply called ‘Apple Card’.

And it’s titanium, baby.

As in metal. Laser-etched. There are no numbers on the front ‒ which coincidentally makes it safe to show off on Instagram, if you’re so inclined (and the people who get this card most certainly will be).

And it’ll totally blow the mind of the 7-Eleven attendant when you plonk it down to buy some Cheezels:

Attendant looks down at shiny metal card … then looks up at you, slowly studying your face.

“Are you some kind of celebrity bigshot ... Mr Cheezel man?”

Yeah, no.

This week Apple CEO Tim Cook gushed about his new credit card: “While we all need them, there are some things about the experience that could be … so much better.”

Okay, so I’m going to pull you up on that one, Timbo. You actually don’t need a credit card. (Well, maybe if you’re spending $319 on wireless Airpods, which make you look like, to quote my old man, a “bloody drongo”.)

Strip out the metal and the marketing and this is just another ‘debt card’, and not a particularly revolutionary one: Apple’s fine print shows it charges up to 24.24% interest on the card. However, there are a couple of things they’re doing that are interesting:

The first is the tech: as you’d expect from Apple, they’ve got a great app for the card which allows you to easily categorise and track your spending, and ‘gamifies’ and personalises it to help you make better financial decisions. That being said, a lot of these features and tracking are already here in Australia with Up Bank. And within a couple of years, all banks will offer this.

The second is the card’s rewards system. They’re going with daily cashback instead of points. This makes total sense. Frequent Flyer points are s-o-o-o 2007. Banks and airlines have created their own confusing alternate currency for much the same reason that Zimbabwe issues trillion-dollar notes: to deliberately confuse the poor plebs who are forced to use it. Bottom line?

The Aussie banks will be disrupted over the next decade, make no mistake. However, I’m not sure it will be by Apple, who are just trying to fill another hole by building their ‘ecosystem’ as iPhone sales stagnate.

And remember: the Apple Card is still just a credit card. So while it’s a danger for our banks … it’s also a trap for iPhone users.

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.

What The Royal Commission Means For You

This column was supposed to be a rip-snorter.

See, Monday — when the findings of the Hayne Royal Commission were released — was like Grand Final Day for me ... I (almost) got more airplay than Kerri-Anne Kennerley. Not only was it the biggest news item of the week, it was arguably the biggest finance story since the GFC.

So, earlier in the week I wrote to the Barefoot Community — literally hundreds of thousands of people — and offered to answer any questions on the Royal Commission, in today’s column.

I had a tin of Nescafe Blend 43, and toothpicks, at the ready to answer the flood of questions.

Here’s what came through:

One guy wanted to know if marijuana stocks would be affected (ummm no, smokey), another asked what aftershave I use (?), and a few wanted to know if it was a good time to buy or sell homes.

So here’s my big takeout from this week:

You don’t really give a toss about the Royal Commission findings, do you?

(Sure, the media banged on about it, but everyone else was like, “How about that psycho on MAFS, am I right?”)

Yet there was one group who flooded my inbox: mortgage brokers — who were angrier than Alby Mangels (google him) at the Hayne-bomb’s recommendation to blow their trailing commissions to Timbuktu.

It was easy to spot them — they often wrote IN FULL CAPS. Why were they so mad?

Well, the biggest change from the Royal Commission recommendations will come in two to three years’ time when you shop for a home loan. If it all comes to pass, banks will be banned from paying both up-front and trailing commissions to brokers. Instead, you’ll pay an up-front fee to the mortgage broker for the advice.

Yet how will that work out in the real world?

Luckily, I happen to know, because I did this last year with one of my staff, Karen, who came to me and said she wanted to refinance her home loan.

We did three things:

First, we shopped around to see what rate online lenders like UBank and Homeloans.com.au were offering.

Second, she rang her bank and used the scripts in my book to see if they’d match thecheapest deal.

Third, I arranged for her to see a totally independent mortgage expert who charged an hourly fee for his unconflicted research, with absolutely no kickbacks. (This is the proposed model that will be in place in a few years.)

His fee for the research?

$4,000.

Well, you could have knocked Karen over with a feather.

“I don’t have $4,000!” she cried.

The independent broker explained it would take 20 hours of research at $200 per hour … but that he would also rebate both the upfront and the trailing commissions.

In the end, Karen ditched him and went with another broker who was recommended by her accountant.

“What did they charge you?” I asked.

“Actually, I don’t remember … but I know I didn’t have to pay anything up front!” she said.

And there’s the problem:

The finance industry has trained customers to expect that financial advice should be ‘free’ … free home loan advice, free insurance advice, and (back in the old days) free financial plans.

However, the truth is that ‘free’ is the most expensive way to get advice — because they’re loading up the cost of the product and generally expressing it as a percentage rather than a flat dollar cost, to obscure it further.

Still, most Aussies are like Karen … they’d rather have ‘free’ advice — no matter how much it costs them in the long run.

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are better bank accounts on offer. How do I know? Because my readers constantly email me about them! So before you do anything, google the best accounts on offer now.

My thoughts on The Royal Commission

Sir John Barnard was by all accounts a ripping bloke.

He was one of the first officials to fearlessly take on the finance industry, and ask a simple question:

“How do we stop these greedy finance bastards from ripping us off?”

His answer was to pass investor protection laws, which later became known as ‘Sir John Barnard’s Act’.

Yet get this: these laws ‒ which aimed to stop the spivs and protect the public ‒ were passed in 1734.

Yes, society has been trying to rein in the finance industry for centuries … without much luck.

Today’s Sir John Barnard, Kenneth Hayne, has now had his go, and he’s done an admirable job cleaning up the corporate kitty litter which our banking fat cats have soiled themselves in.

Yet the truth is that Hayne, like Barnard, is up against it.

That’s because human nature hasn’t changed in 285 years, and it never will. Gordon Gekko ‒ the cigar-chomping, suspender-wearing Wall Street character ‒ nailed it when he said, “Greed is good”. (Well, for bankers at least.)

Greed is what caused the public to be fleeced (and outraged) in the South Sea Bubble of the 1720s, the Global Financial Crisis of 2008 (where bankers made billions in bonuses ‒ and only one went to jail), and the dodgy dealings that the Hayne Royal Commission uncovered.

And like clockwork, every decade (or so), the ramifications of this greed come to light and shock the public. New laws are brought in … and then, a few years later, things largely go back to normal.

How can this be?

Well, I like to think of it as a billion-dollar game of whack-a-mole: as you read this, the finance industry is poring over the Royal Commission findings, looking for angles. Then, like a bobbing mole, they’ll shift their position. They have, after all, 29.5 billion reasons (cash profits of the big four per year!) to care more about it than you and I do.

My view?

The bankers are going to bank, and the lobbyists are going to lobby.

And so, if the industry isn’t going to change … we must.

While Kenneth Hayne should be thanked by every Australian for the work he’s done, arguably the biggest gift the Royal Commission has given us is the proof that financial institutions do not have our best interests at heart. Strip away their fluffy advertising, and the talk of cultural change, and the fundamentals haven’t changed since 1734:

No one cares more about your money than you do.

If we really want genuine change, we need to teach the next generation this simple truth. By my reckoning, kids spend a total of around 2,300 days at school. Yet not even one of those days is dedicated to teaching them how to pass the ‘money exams’ they’ll be tested on every single day of their lives.

Mark my words, greed isn’t going away. Therefore, we owe it to our kids to make sure they learn the lessons we didn’t. And that’s why this Royal Commission should be about kicking off a financial revolution, that begins with us banking on our kids.

Because if we don’t the bankers will.

Tread Your Own Path!

The Dollarmite Rebel

Hi Scott,

I purchased your latest book, The Barefoot Investor for Families, and gave it to my nine-year-old son, who has taken to it like a duck to water. He is enthusiastically helping with cooking, and has set up his three jam jars. He has a presentation at school coming up and, due to inspiration from your book, he wants to do his talk on why his school should give Commbank the flick. I don’t want to discourage him, as I too believe in the cause -- but is it something best left for parents to bring up with the school?

Barry

Hi Barry

What do I reckon?I reckon this sounds like a life lesson he’ll remember for years to come.Here are a few things I’d talk through with your son:

Explain that a credit card is a very expensive loan from a bank. Young people often get themselves in a lot of trouble with credit cards by borrowing too much. Credit cards tend to make everything you buy much more expensive. For most people -- especially young people -- the best credit card is no credit card.And perhaps he could ask:

Why does Commbank’s Start Smart Program teach kids -- in grade three -- about the benefits of credit cards?

Then he could ask his teachers:

Have you ever got in trouble with a credit card?When we get older, should we get one?

A big part of financial education is to be skeptical about what banks (and advertisers in general) offer up.

You’re teaching your son to be an independent thinker and to intelligently and respectfully question authority.

In this case, he’s got truth on his side: there is no justification for allowing a bank to spend millions of dollars for the exclusive right to teach our kids this core life skill, much less for rolling out a marketing program that is worth, according to one analyst, as much as $10 billion!

Let me know how he goes!

Scott

Randy Andy

Scott

Today I called my bank to negotiate after seeing a special home loan rate advertised on their website. I followed your script and asked for the new rate. I was rebutted with “Sorry, that’s only for new customers”. When I replied with, “Well paint me red and call me Randy”, the operator laughed and said, “You’ve been reading Barefoot?”Then he gave me the lower rate. You saved me over $1,000 a year in a two-minute phone call. Thanks, cobber!

Andy

Hi Andy,

That’s totally wild!

I was speaking to a banker the other day who said that his call centre staff know when they’ve got a Barefooter on the line, following my script to get a better deal. He also said that if they’re a good customer they’ll “more often than not get a discount”. That’s not because the bank staff are kind hearted, but because they’ve also read the book, and they know my next step. They know that that customer (if knocked back) will move to another bank and get a better deal.

Thanks for reading,

Scott

Is Dollarmites Done For?

Hi Scott,

I read in the news this week that ASIC are finally launching a review into school banking -- maybe it has something to do with that book of yours! What is your view on this? Do you think this could get the banks out of our schools, or is it still too early to get our hopes up?

Ethan

Hi Ethan,

Here’s what I hope the ASIC review will discuss:The Commonwealth Bank’s school banking program has, according to their website ‘been teaching generations of young Australians the importance of saving and lifelong money skills since 1931’.

So let me ask you this:

If what they did worked, why do we currently have record household debt, and low savings?

How did we end up with the horrors of the Banking Royal Commission (where Commbank received a gold medal for charging fees for no service to dead customers, ripping off millions of dollars of retirees’ money)?

And why are school leavers the most financially illiterate of all Aussies, according to ASIC research?

The answer, I believe, is that up till now many schools haven’t given financial education the emphasis it really deserves — possibly because they wrongly assume that Commbank is taking care of it.

The best outcome from this ASIC review would be that schools finally understand that financial education is a core life skill, that is far too important to be outsourced to a bank that pays millions of dollars to market to our kids.

Thanks for reading,

Scott

The Best Travel Money Deal

Hi Scott,

I read an article saying that Australians are getting ripped off by $2 billion a year on foreign exchange, mostly by the big banks. I am heading overseas at the end of the year, so what would you suggest I do to get the best deal?

Rick

Hi Rick,

You’re right, the big four bank accounts are generally rubbish: on average they charge $5 ATM fees and 3% currency conversion fees. If you buy foreign notes before you go, you’ll be charged around 2.5% commission (at a bank), and triple that at the airport (no, no, and ‒ are you crazy? ‒ no!).

I simply use my zero-fee banking account that doesn't have currency conversion fees, and all international ATM fees are rebated.

Scott

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.

Best Kids’ Bank Account?

Hi Scott,

My 14-year-old son wants a debit card. He is a good saver and has a few thousand dollars in his bank account. But he currently saves with BankWest and they have an age restriction of 16 years for debit cards. I am thinking of changing his savings account over to Suncorp, as I think their interest for savings accounts is 2.6%. Any suggestions for institutions that will offer a debit card to a boy of 14 years?

Mandy

Hi Mandy,

Ah, the BankWest Kids Bonus Saver!

It’s like a slippery dip on a hot Summer's day … with a dog turd waiting for you at the end.

It certainly looks good ‒ earn 4.75%***** ... but then you get … asterisked.

* In addition to setting up a BankWest Kids Bonus Saver you also need to set up another Bankwest account, the Children's Savings Account (which has a much lower interest rate).

** You only earn the bonus interest when you deposit $25 to $250 per month and make no withdrawals.

*** In any month that you don’t meet these conditions, the standard interest rate (currently 0.01% p.a.) applies.

**** After 12 months everything over $1 in the account will be swept into your linked Children's Savings Account, “so you can start afresh”, says Bankwest. Yes, you can start afresh … with all your kid’s cash in the lower interest rate Children’s Savings account.

Slippery!

Okay, so the account you mention, Suncorp, pays 1.4%, and a bonus 1.2% ‒ if you deposit at least $20 each month and make no more than one withdrawal each month ‒ so a total of 2.6%. They also allow kids over the age of 11 to get a debit card.It’s okay, I guess.

But I’d be tempted to go with the CUA Youth eSaver, which pays 4% p.a. with no pesky hoops to jump through, and link it to the CUA Everyday Youth Account, which will give him fee-free banking and a debit card for kids over 14.

(Note: I get paid nothing for mentioning CUA, though I do get a kick out of berating BankWest.).

Scott

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.

Where Do I Save For My Kids

Hi Scott,I have the CBA Youthsaver account for my two boys. They’re not earning a lot of interest, and after ringing CBA I found that I need to be making regular deposits into their accounts to accrue the bonus and credit interest. I have looked at investment bonds, but they require $100 a month and that is a bit hard for a sole average wage earner with a wife, kids, mortgage and bills. Is there a better way to set my boys up, or am I missing something?

Rick

Hi Rick,Most kids’ bank accounts are marketing gimmicks.Having said that, the best account is the CUA Youth eSaver, which pays a variable 4% per annum on balances up to $5,000. That’s good for short-term saving, but you really don’t want to save long term for your kid in a bank account.If you have a longer timeframe (say seven years plus), you could invest in your wife’s name (the lower income earner) with an app like Raiz, where you can kick things off with a few bucks, rather than the higher amounts you need for investment bonds..Regardless of where you choose to save, the fact that you’re saving some money for your kids tells me you’re already on the right track: the number one predictor of raising financially fit kids is being good with money yourself.

Scott

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.

No Credit Card for You!

Hi Scott,

Today I opened accounts with ING Direct and applied for a credit card. I also transferred money from my current bank to ING. With my credit card request, it was denied because I am retired and do not get a weekly payslip. My wife and I get over $40,000 a year tax-free, own our home, and have very little debt. Their decision to refuse me, even though I have an exceptional credit history, smells of discrimination to me. Your thoughts?

Doug

Hi Doug

Yes, it sounds like the bank is discriminating against you … though is that a bad thing?

Given you’re retired and living off $40k a year, it could be argued that you can’t actually afford a credit card.

If you don’t pay it off each month, the interest bill will make everything you buy 20% more expensive. And if you are paying it off each month, why bother?

Rewards points, right Doug?

Unfortunately rewards points are ‘so 2016’.Analysis from comparison site Mozo has revealed that the big four banks have slashed the value of their rewards points by a whopping 96% since 2016. Here are the figures: if you spend $24,000 a year on your credit card, you’ll receive, on average, just $12 back in rewards.

And if you forget to pay your CBA credit card bill you’ll be hit with a $20 fee, plus backdated interest.

How’s that for discrimination?

Scott

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are better bank accounts on offer. How do I know? Because my readers constantly email me about them! So before you do anything, google the best accounts on offer now.

Ground zero of the mortgage crisis

Let me take you to ground zero of the mortgage crisis.

Right now the National Debt Helpline (1800 007 007) is receiving so many calls that they’re at breaking point.

The helpline refers people in the most dire situations on to community-based financial counsellors ‒ yet the demand is so intense that the wait time for someone to actually sit down in person and help has stretched out to three months!

(And it’s only getting worse. As I reported last week, a study has suggested that one million people may find themselves in mortgage stress if ‒ when! ‒ interest rates move upwards by just 0.1%.)

Hang on, who are the financial counsellors and what do they do?

These guys are the unsung heroes of the financial services industry. They’re free to use. They’re independent. And in your darkest hour they’ll stand shoulder to shoulder with you and fight for you when no one else will:

For the guy who’s just been diagnosed with a terminal illness …

The mother who grabbed her kids and fled from her violent husband in the middle of the night …

The young woman with a brain injury who doesn’t understand the (deliberately confusing) payday loan contracts …

The father who was laid off from work and is just trying to keep food on the table …

Yes, the ongoing Banking Royal Commission has shown us ‒ over and over again ‒ that we need these heroes.

Yet the truth is that the financial counsellors are having their own financial crisis: there are not nearly enough of them on the ground. I believe so passionately in what they do that I’ve donated 10% of my book royalties to the Financial Counselling Foundation … yet it’s a drop in the ocean.

There is only one man who can truly help: Dan Tehan.

Dan is the man, because, as the Federal Minister for Social Services, his portfolio funds the community-based financial counsellors. Dan has made recent announcements on financial counselling funding, but this only extends existing funds and doesn’t grow the services to meet demand. You need to fund ’em, Dan … it’s a growth industry!

So here’s my call to you, Dan Tehan. The financial counsellors need someone to stand shoulder to shoulder with them and fight for them when no one else will.

Now’s your chance, Minister. Make us proud.

Hey Kids, Let’s Learn about Credit Cards!

Dear Scott

I am a teacher and I just got an email which made me angry, and I have you to blame... or should I say thank? You see, our children are attending a compulsory ‘StartSmart’ lesson once a week hosted by the Commonwealth Bank. I looked at the program for Year 3, and what is the very first concept they mention? You guessed it, credit cards! I will be attending the session with my students and I can already feel the rage inside.

Narelle

Hi Narelle,

They’re talking to eight-year-olds about credit cards?

That’s kind of … shocking.And the concept of compulsory corporate-branded education reminds me of ‘Hamburglar University’.

However, you’re a teacher, which means you can be a force for good. You can stand up and fight for your kids. If I were in your shoes, I’d talk to your principal about kicking the CBA out of your school ... and use it as a financial lesson for the kids.Here’s how you can explain it to your students:

“The CBA has spent millions of dollars of their shareholders’ money buying their way into classrooms.

“Their motivation is to make that money back by signing you up to be their customer.

“One of the bank’s most profitable products is a credit card, and when you turn 18 they’ll likely send you one.

“The bank brings mascots to assemblies, like ‘Cred’, which make credit cards sound normal.

“However, the truth is that you should avoid them.

“This week ASIC released a report that showed that one in six people are caught in what they call a credit card ‘debt trap’. Worse, they found that young people’s credit card debts were ‘of particular concern’, and that they ‘were more likely to be in delinquency, and multiple cards were over-represented’.

“The CBA will never tell you that they’re ‘debt traps’, because it’s how they make their money.

“However, that’s not independent education; it’s really just another form of marketing. And that’s the reason we decided to kick the CBA out of our school.

“Now that would be a fantastic financial lesson!

Scott

When the Bank of Mum and Dad Goes Bad

Can you remember when you got your first credit card?

Mine was automatically bundled into my NAB student banking package when I went to university. At the time NAB said it was a smart idea for students to have access to a ‘low-rate credit card’ for ‘emergencies’ (like bar night).

That card allowed NAB to begin building a marketing profile on me. Through the positioning of minimum repayments on my statements and online banking, they trained me to see their credit limit as my money.

Then they began bumping up my credit limit.

That’s how the game works.

Commbank are doing this right now with their latest advertising campaign, which targets young people to sign up for their ‘low-interest’ Essentials credit card … instead of going through the hassle of borrowing money from their parents.

One CBA billboard says: “Because the Bank of Mum and Dad will probably give you a lecture, and you had enough of those at uni.”

Their TV ads show millennial kids having to suck up to their parents ‒ listening to their dad’s jokes, eating their mother’s terrible cooking ‒ just so they can borrow some money. CBA’s tagline at the end of the ad says: “For when you’ve outgrown the bank of Mum and Dad.”

A spokesperson for CBA said their ads aren’t manipulative in the slightest.

In fact, they’re in it to help young people:

“We believe it’s really important to help young adults develop good financial habits, such as budgeting and managing their money wisely. As they move into full-time employment, their spending and payment habits change, and this includes using credit cards.”

That’s the corporate spin, though there’s no way they actually believe it.

It’s all just part of the game.

(To be fair, the vast majority of CBA employees are hard-working, diligent professionals who care deeply about their customers. It’s just the top brass that are knobs.)

Tread Your Own Path!