Barefoot Investor: How renters are being ripped off
A new “rewards” program is doing the rounds promising renters a great return just for paying their rent. And I’m outraged.
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Being a renter must suck right now.
After all, you’re sitting on the property sidelines watching house prices go up, up, up.
If only there was a reward for renters.
Well, it turns out there is. It’s a fast-growing scheme called ‘Rental Rewards’, which many of Australia’s leading real estate agencies have signed up to.
Here’s how it works: real estate agents outsource their rent collecting to Rental Rewards, who charge renters a fee to pay their rent, and reward them with Qantas Frequent Flyer points.
On their website the company describes their service as “revolutionary”, “convenient” and “rewarding”.
Yet on the popular ProductReview website, customers of Rental Rewards describe it as: “Absolutely terrible”, “So bad I can’t believe it exists” and “Avoid! Avoid! Avoid!”
(And, in the interests of fairness, I’m not cherrypicking the data: Rental Rewards has 31 one-star reviews and they are all universally terrible.)
Mandy, a reader, wrote to me explaining how it affects her:
“I used to pay my rent by direct transfer for free. But my property manager just informed me I am being migrated over to this third-party platform, Rental Rewards, that charges a fee. I chose the cheapest option — $78 a year — but some of the credit card options work out to be $312 a year, on top of rent. And their ‘fee-free’ option? Personal cheque! Which my bank charges for, and the rental office is over an hour away.”
WOW!
In most states in Australia the Rental Code requires that real estate agents provide at least one fee-free way of paying rent. Yet the only person I know who still has a chequebook is my uncle Bob, a cocky from Walpeup, and even he’s thinking it might be time to call stumps on the bark and biro.
So let’s unpack this for a moment.
First up, Rental Rewards encourages often vulnerable low-income renters to pay their rent with a CREDIT CARD, in order to utilise their ‘interest-free days’.
And if you think my eye is twitching right now, and that I am POUNDING THE KEYBOARD, you are right!
Yet let me simmer down for a moment, because their website promises renters will earn “1,000 Qantas Frequent Flyer points every year when you pay by card”.
Given I famously don’t have a credit card, and don’t play the points game, the truth is I had no idea whether this was a good deal or not. So I jumped on to the Qantas Rewards Store to see what I could buy with a year’s worth of Rental Rewards points.
I wanted to buy something practical, like, say, hair removal. Alas, it wasn’t even a close shave: the fancy Philips shaver cost 69,000 points … taking 69 years of paying rent to earn enough with Rental Rewards.
Again, I’m not cherrypicking the data: there was NOTHING on the Qantas Store for sale for 1,000 points.
Enough already.
Look, as a financial counsellor I’m regularly in the trenches with vulnerable people.
Think about a young mum with three school-aged kids who has escaped family violence. She struggles to pay her $350 a week in rent. One day her property manager tells her that from now on she’ll be hit with a 1.45% processing fee for Rental Rewards (the standard fee they have on their website). That’s an extra $264 a year she’ll have to pay.
Now, for you and me $264 may be a nice dinner out with friends. For her it’s a year’s worth of second-hand school uniforms and shoes for the kids.
It’s a lot of money.
Worse, she’s powerless in this situation because she doesn’t want to upset her rental manager and risk them not renewing her lease.
One last thing: the Qantas Store shows that a Bunnings $100 gift card costs 23,170 points. Which suggests the value of a Qantas point is currently around $0.004 cents. In other words, those 1,000 rewards points that cost our single mum $263 a year are worth a measly $4 bucks.
Look, can you do me a favour?
There are a lot of smart people who read this column. If you’re a property investor (or you know someone who is), I want you to ring up your real estate agent and ask whether they are signed up to Rental Rewards. And if they are, ditch them.
Take your business to somebody who respects the person who’s paying off your asset.
Rental Rewards have been approached for comment.
Tread Your Own Path!
"An earlier version of this column incorrectly said that Rental Rewards gets around the requirement for real estate agents to provide at least one fee-free way of paying rent by accepting cheques. I am happy to correct the record. Rental Rewards does not accept cheques. It is real estate agents who offer payment by cheque as a fee-free option to tenants."
FIFTY YEARS OF ABUSE?
Hi Scott,
My parents are in their 70s and have always had separate accounts. Now that Mum has retired and Dad refuses to, Mum is forced to live way below the poverty line. They own their own home and Dad pays the household bills because he is still working, but it leaves Mum with pretty much nothing. I am afraid this is going to end in divorce, and we know the frightening statistics on elderly homeless women these days. Who can assist them?
Linda
Hi Linda,
Keep an open mind.
Okay, so it could be that your dad is a controlling bastard. If that’s the case your mum won’t end up homeless: she has a claim on the property and any other assets, and a loving daughter to help her.
On the other hand, your father may have contracted ‘chromatophobia’.
A chrome-what?
It’s a $10 word that basically means ‘having a fear of spending money’.
It’s a condition that affects many older people who are in the process of turning off their income taps for good … and I’ve seen it happen to very wealthy retirees too. So what I’m saying is, don’t write your old man off yet: it may be he’s understandably freaking out about this major life transition.
So what can you do?
I’d encourage your parents to sit down with a financial planner. They can map out their post-retirement investing and spending plan, which will give your father the assurance that he’ll be okay.
CALL THE COPS
Hi Scott,
After reading your book, I called the police, locked my abusive ex-partner out of the house, and got out of massive debt (more than $350,000!). Now I have over $100,000 in savings, and a new lease on life. I have even had credit card cutting-up parties at my house for friends I have guided out of financial pickles. Now I would like to help other people like me who may be thinking there is nothing left to live for. It is a horribly dark place to find yourself in. What should I do to help? Should I go and study finance? Can I volunteer for you?
Thanks, Ella
Hi Ella,
You have what we call in the game ‘lived experience’: you’ve stared down an abusive partner, dealt with the cops, and not only begun again, but thrived.
You’ll not only have empathy for people who find themselves in that situation, but you’ll be an inspiration to them as well.
So what are your options?
Well, you could quit your job and study a Diploma of Financial Counselling full time. Though there’s a chance you might end up regretting doing that.
It’s a big commitment to take a year off work and invest $6,000+ in a course. And after all that you may struggle to get a job immediately.
Reason being that over the past few years there have been more graduate financial counsellors than there have been jobs. However with adequate, sustainable funding I expect this will all level out eventually.
In the meantime, you may want to keep your job, and volunteer at a local community organisation, or better yet, apply for paid positions with them!
Well done. You Got This!
Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need
(HarperCollins) RRP $29.99
If you have a money question, go to barefootinvestor.com and #askbarefoot.
Originally published as Barefoot Investor: How renters are being ripped off
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