Fee-free’s hidden cost

THE other day, ING sent me a mass-marketing email with the subject line: “Scott, refer a friend and you can both get $100.”

Now, given that my book recommends setting up a couple of ING accounts ...

And given that my book has sold over 500,000 copies ...

And given that ING has just announced they’ve achieved “a record 50 per cent jump in customers this year” . . . why the hell am I even writing this? Why aren’t I sipping a Bacardi in the Bahamas? Oh that’s right, old Dumbo here doesn’t accept any kickbacks.

To be serious for a second: I have no allegiance of any kind to ING. My only allegiance is to my readers, and I only recommended those ING accounts because they have zero account fees and zero ATM fees, and they pay a (relatively) high rate of interest.

Why am I telling you all this? Because I feel a responsibility to keep these bastards honest.

And this week ING announced some changes to the accounts. So I feel it’s appropriate to check them out.

First, they’re now offering zero ATM fees globally (speaking of the Bahamas). Coupled with the fact that ING already offers the wholesale exchange rate from Visa without a clip — which is why I’ve found I get a better rate than with cards from other banks.

Second, and more importantly, they’ve also eliminated international transaction fees on all overseas purchases, a saving of 2 per cent. Big news if you buy online.

The fine print is that you need to deposit $1000 a month into your account and make five transactions — in other words, make it your everyday account. And why wouldn’t you? It’s an all-in-one ripper: good for everyday banking, good for buying crap online, and good for holidays overseas.

Just be warned: do not take their upsell on their sleazy new credit card … after all, that’s what’s cross-subsidising all this fee-free generosity!

Tread Your Own Path!

MANDY ASKS: I’m a 26year-old woman working full time in a job I hate.

Quite frankly, I am sick of working for the man!

Now, I have never had my own business before and I am a little apprehensive, but I love fitness and I also love F45 (a new high-intensity interval training fitness franchise). It is rapidly growing on a global scale, with 750 studios around the world already.

The cost to open a franchise is $150,000, plus $1700 a month in fees (plus rent, wages, taxes, etc).

I do not have the capital, so I would also need to apply for a business loan. Do you think this is a good idea? BAREFOOT REPLIES: A mate of mine does F45 — short for “Functional 45-minute’” training — and fair dinkum he never shuts up about it.

But let’s get one thing straight: if you buy a franchise you’ll still be working for the man — but in this case it’ll be the ex-finance dude who dreamt up the F45 franchise model.

I imagine he’s currently lifting gold-plated barbells from all the money he’s making … and good on him too! All I’m saying is that in this equation, he’s the entrepreneur — and you’re the worker.

So, would I buy an F45 franchise? No, I wouldn’t.

Let’s you and me do a money workout.

First, let’s look at the sector. Australia’s gym market is one of the most competitive and saturated in the world, according to Ibis World. (Why are we so fat, then? Is it the chicken or the egg? Or maybe it’s the chicken and egg sandwiches.) Simply put, there are a lot of businesses fighting it out for our fitness dollars.

Second, one of the key selling propositions of the F45 franchise is that there’s not a lot to it — two trainers, four walls, and a bit of equipment.

Easy to start … and easy for potential competitors to start too. And what about when “F6” comes out? (Seriously, I could totally blitz six minutes of training.)

Third, while F45 is going bananas right now, the business is just five years old.

What will it look like 10 years from now? Fitness is a faddish industry (hello Zumba, Tae Bo, and pole dancing fitness). Heck, F45 is itself a gentler version of CrossFit, which is now reportedly starting to run out of puff. So, here are a couple of questions you need to ask yourself:

How quickly could you earn back your upfront costs (a $150,000 loan plus $1700 a month)?

Even better, could you avoid borrowing (which always ramps up the risk and makes life more complicated) and instead — as we Barefooters call it — “swing on the trapeze”. That is, keep your day job, start a morning and weekend fitness boot camp, and make a go of it for the next 12 months to test it out.

If it’s a winner, quit your job and go for it! FIONA ASKS: My 18-year-old daughter lives at home, pays no board, works full time, and is saving for her first property.

She also wants to buy a new car ($20,000) so she can get a credit rating, which will make it easier to get a home loan.

Should she keep driving the old car and put all her money towards the house deposit, or get the car loan and take a bit longer to get into the property game? BAREFOOT REPLIES: Congratulations on raising such an ambitious daughter!

Now it’s up to you to teach her some common sense.

Spending $20,000 on a brand-new car will not help her buy a home in any way, shape or form.

Instead, she’ll just end up forking out roughly $30,000 for a car that will only be worth $10,000 in five years’ time. The idea that you need to take out a loan so a bank will lend you more money is absurd.

Just like Sam Dastyari, the credit reporting agencies have done their darnedest to convince everyone they’re more important than they really are.

It’s true that if you’ve got something bad on your credit file it can be a red flag to lenders. But for a cleanskin, like your daughter, it’s really not a big deal.

What is a big deal for lenders is: 1) a stable income that can comfortably meet your proposed repayments.

2) a verified savings history, and 3) a meaty deposit (I recommend 20 per cent).

If your daughter can tick those three boxes, she’ll get her loan.