The Barefoot Investor Shuts Down A Man Who Called His Financial Advice 'Irresponsible'
There's a group of loyal Aussies who worship at the altar of 'Barefoot Investor' Scott Pape, running around with cards marked 'splurge' and putting their money into neatly defined buckets.
Yet despite being a #1 bestseller, anyone who works on the internet will know you can't please them all. And you definitely can't please a 73-year-old man named Wayne who labelled the finance guru's latest finance advice as 'irresponsible'.
"Your 'shock/horror' credit card piece in the Sunday Herald Sun was one of the most irresponsible financial articles I have read for some time," Wayne wrote.
"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."
Now firstly, well done to Wayne and his wife for not getting into any trouble with his credit card because honestly that's quite impressive. Except that's not the experience of many many Australians, which Pape quite rightly pointed out in his response.
"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, which teaches this to nine-year-old kids who attend their schools education program)," Pape wrote.
"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."
Pape added while interest rates have fallen to their lowest, the average credit card interest rates haven't moved from 18 per cent since 'Allan Border donned the Baggy Green', which I assume means a very long time ago.
"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 percent a year to an average of $135 a pop, according to Canstar," Pape said.
"At the same time, the value of credit card rewards points has been slashed. Last year a report by comparison site Mozo found that they were virtually worthless, plummeting a staggering 96 per cent since 2016."
Pope points out that some people like Wayne pay off their credit cards on the due date, qualifying for a 55-day interest-free loan. But he believes that for most people, especially the young and vulnerable, credit cards are a 'debt trap'.
"Wayne, it’s these people who are subsidising your interest-free loan. So who’s being financially irresponsible, sport?" Pape asked.
Natasha Janssens, finance expert and author of Wonder Woman’s Guide to Money told 10 daily that credit cards can be a useful tool, but only if used properly.
"If you have a credit card as part of your home loan package, you take advantage of the 55 day interest free period on the credit card and use it to pay most of your living expenses. It means that your pay check can be sitting in the offset account longer, "Janssens said.
"Doing so can save you thousands of dollars in interest on your mortgage and can help you build equity or become mortgage free much faster. But, using this approach means being extremely disciplined with the use of the credit card and not overspending."
Like Pope argues, Janssens said if you don't pay the balance of the credit card in full by the due date you can forfeit the interest free period and doing so becomes a very costly exercise.
"For many people, credit cards present too big a temptation to overspend and they can make it much harder to keep within a spending budget."
While Pape believes the banks do their best to lure young and vulnerable people into taking out credit cards, Janssens adds that she doesn't think a certain generation is necessarily more financially responsible than another.
"One could argue that it’s the baby boomers, but I have seen just as many baby boomers with a spending problem as I have millennials," she said.
"The way we spend our money comes down to a large extent to our emotions and habits and I believe these are a far greater predictor of our spending habits than our age."
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