No game changer on ATMs

Mercury (Hobart) - - BAREFOOT INVESTOR - SCOTT PAPE

SEVEN days is a long time in bank­ing. Se­ri­ously, it is: the Big Four col­lec­tively rake in about $576 mil­lion in prof­its each week.

Any­way, last Sun­day you would have seen that they all folded like a cheap card ta­ble and stopped slug­ging us for for­eign ATM fees (the fees you pay for not us­ing your own bank’s ATM).

Quite a few peo­ple sug­gested on so­cial me­dia that their de­ci­sion may have some­thing to do with my book’s strong stance on zero-fee bank­ing. I’m happy to take the credit, but I’d ar­gue it had much more to do with the fact that the CBA has had more scan­dals than Shane Warne and needed to make a good PR move.

Still, I’m glad the banks have ap­par­ently worked out how “deeply un­pop­u­lar they were with their cus­tomers” — con­ve­niently, just as every­one has started mov­ing away from ATMs to­wards “tap-and-go”. So is this a game-changer? Not re­ally. My wife and I will be stick­ing with ING for now (and for the record, I get paid ab­so­lutely noth­ing to rec­om­mend them). Rea­son be­ing, I like that ING has zero-fee bank­ing, that they re­bate all fees from all ATMs (not just the Big Four’s net­works), and that they have a rel­a­tively high-earn­ing (up to 2.8%) linked saver ac­count. Plus, if I go full geek, I can do a ‘wristy’ and pay for things with my Ap­ple Watch, which would im­press the hell out of the over­worked, un­der­paid 7-Eleven at­ten­dant.

Still, there’s one thing you can be sure of: the banks will still try to work out ways to hit us some­where else — like, say, covertly re­duc­ing the value of credit card re­wards points by 63% over the past year.

CREDIT CARD CON

MATT WRITES: I had three sep­a­rate friends rec­om­mend that I read your book, so I gave it a try. I have to ad­mit I was en­joy­ing it, un­til I got to page 79. That’s when you started talk­ing about credit cards, and you showed that you have no idea about them.

If you re­ally are a money guy, surely you could make credit cards work for you? If you like, I could teach you how to use the banks to get se­ri­ous re­wards. Maybe you could join me in first class . . . or maybe they don’t let peo­ple in without shoes? BARE­FOOT REPLIES: Bang! You sure schooled me.

The truth is that I have my own re­wards scheme go­ing on — but it’s got noth­ing to do with flights, or toast­ers. Let me ex­plain: It’s no se­cret that the banks have been play­ing hokey­pokey with the value of re­wards points for years, but right now it’s just get­ting ridicu­lous. Th­ese days get­ting a re­ward from your credit card is al­most as hard as get­ting a re­ward from your wife after seven years of mar­riage.

Case in point: over the past 12 months the banks have been se­cretly shut­ting down, or rad­i­cally re­duc­ing, the value of their re­wards cards. Ac­cord­ing to fi­nan­cial com­par­i­son site Mozo, the banks have yanked the value of their re­wards points, on aver­age, by a stag­ger­ing 63% in the past year alone.

Bot­tom line: the value of the points, and the re­stric­tions on redeeming them, will only con­tinue to go one way: down.

So what’s my re­wards pro­gram?

Well, it’s not hav­ing to bother play­ing the re­wards point shuf­fle. It’s not hav­ing to worry about in­no­cently miss­ing a re­pay­ment and be­ing slugged with back in­ter­est for the month. It’s not hav­ing to pay a hefty an­nual fee.

But Matt, do you know what the plat­inum-ti­ta­ni­um­re­ward-of-them-all is? I’m mod­el­ling good habits for my kids. They’ll grow up know­ing Dad doesn’t do credit cards. That’s a pow­er­ful mes­sage, and for me that’s the ul­ti­mate re­ward.

CAP­TIVE AU­DI­ENCE

KELLY WRITES: I am a teacher and run IT classes at a cor­rec­tional cen­tre in Queens­land. Hav­ing just read your book, I’ve been in­cor­po­rat­ing some of your prin­ci­ples into the classes. For ex­am­ple, we set out 60% “liv­ing ex­penses” and 40% “other” on an Ex­cel spread­sheet and worked out the com­pound in­ter­est.

I men­tioned the book, and one of the young men (it’s an all-male prison), who is 28, asked for the ti­tle and wrote it down. I then re­mem­bered I had a copy in my prison-is­sue, clear-plas­tic bag, so I read them the part of your book called “Let­ter to My Boys”.

He said: “You know, I’ve been feel­ing fairly de­pressed the last cou­ple of weeks. This has given me some hope for when I get out.”

I said to an­other young man in the class, who has a six-yearold son: “If you had some­thing like this that you could use to ed­u­cate your boy when you get out, would that give you some­thing to fo­cus on other than drugs and the crim­i­nal life that goes with it?”

He re­sponded: “Ab­so­lutely, I can’t wait to hear more, and I would love to set my son up so he doesn’t fol­low my path.”

I felt like a proud mother! Isn’t it nice to know that your book is touch­ing peo­ple in the most un­con­ven­tional cir­cum­stances. I love my job, I love the young (and older) men I work with in prison. But I get dis­ap­pointed when I feel we are not re­ally giv­ing them skills to change their lives — though I try. I am there with them, and I know some of your sim­ple prin­ci­ples will be too. BARE­FOOT REPLIES: Thanks for your amaz­ing email.

I’ve spent a bit of time in pris­ons my­self. (Help­ing young in­mates with their money, not do­ing time.)

For those who haven’t read my book, the “Let­ter to My Boys” is a let­ter I wrote to my boys (in the fu­ture, when they can read) ex­plain­ing the power of com­pound in­ter­est.

Briefly: A teenager gets a job on a farm and in­vests $5000 a year from age 15, then stops at age 25, then lets the com­pound in­ter­est tick over. To­tal out­lay: $50,000.

His mate doesn’t start in­vest­ing till he’s 25, but then in­vests $5000 a year for the next 35 years. To­tal out­lay: $180,000.

At age 60, who has more money?

You’d think it’d be the guy who put in $180,000, right? Wrong. Even though the teenager has put in less than a third of his mate, he ends up with 50% more ($2.7 mil­lion, ver­sus $1.64 mil­lion).

The power of com­pound in­ter­est, along with dis­cov­er­ing the joy of hard work, is one of the great lev­ellers in life. It doesn’t mat­ter what your fam­ily back­ground is, how smart you are at school . . . or whether your fa­ther has been in jail.

Every­one needs hope, es­pe­cially the chil­dren of prison- ers, so I’m send­ing you 20 signed books. Keep up the good work!

COST OF IN­VEST­MENT

BEV­ER­LEY WRITES: I have a rather curly ques­tion but I hope you can an­swer it. My hus­band and I are five years from re­tir­ing and, com­bined, we have just over $620,000 in as­sets, in­clud­ing an in­vest­ment prop­erty with a mort­gage. My ques­tion is, does Cen­tre­link take the mort­gage from the in­vest­ment prop­erty off the to­tal of in­vest­ment as­sets when as­sess­ing us for the Age Pen­sion? BARE­FOOT REPLIES: In a word, yes. Cen­tre­link only counts the eq­uity in the in­vest­ment prop­erty (less the debt) for the Age Pen­sion as­set test.

If, how­ever, you have both a mort­gage on your home and a mort­gage on your in­vest­ment prop­erty, I’d en­cour­age you to fo­cus on pay­ing down your home over the next five years, be­cause its value is to­tally ex­empt from the as­set test.

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