You’re a Shocker, Barefoot

Question


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

Scott's Answer


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