Time for big banks to ban credit cards for gambling
Aussies are the biggest punters on the planet and credit cards used for gambling are a huge money spinner but it’s time to pile pressure on banks to put families before their profits, writes the Barefoot Investor.
Barefoot Investor
Don't miss out on the headlines from Barefoot Investor. Followed categories will be added to My News.
I picked up the phone at my financial counselling office. It was a woman, breathing very heavily.
“I need to speak to a gambling counsellor.”
“Do you have a gambling problem?” I asked.
“No, it’s not for me. I’m not that stupid. It’s for my idiot husband.”
Turns out she’d just caught her husband of almost 20 years gambling on his phone.
He broke down in tears and admitted to her that he’d been gambling heavily for the past five years.
“How much has he lost?” I asked.
“Four thousand dollars”, she said bitterly.
“As in … total? That’s it!? Are you sure?” I asked, with both my eyebrows fully cocked.
“Yes, I am sure. I told him, ‘If you’re lying to me, I’ll cut your nuts off!’”
Intense.
Then again, if my wife had threatened me with that, I’d have low-balled her too.
(Pardon the pun.)
Look, I have no doubt this poor woman was in shock and denial.
And I also have no doubt that her husband’s losses would rise as she put down her butcher’s knife.
Here’s a ballpark of what he may end up fessing up to, courtesy of Graham, a real-life case study from Financial Counselling Australia:
Graham thought he and his wife were tracking along nicely. His wife enjoyed the occasional “flutter” on the weekend. Besides, she couldn’t do too much damage — she only earned $672 a week. Then he got flattened when she confessed to running up $130,000 in debt.
They may well lose their home.
You probably know that we Aussies are the biggest punters on the planet … but you may not appreciate that the biggest losers are the families of gamblers.
And the winners?
There are three:
The gambling companies (obviously). The governments (tax revenue). And … the banks.
You see, credit cards used for gambling are a huge money spinner because gambling is a cash advance, which attracts a higher interest rate, charged from day one.
Last month Financial Counselling Australia called on the Australian Banking Association to follow the lead of the UK, which last month banned credit cards being used for gambling.
A handful of smaller Aussie banks have already done so, but none of the big four banks have yet … though they say they’re “considering it”.
Thankfully, self-isolation has meant that with the casinos and pokie-dens closed, we’re no longer gambling.
Yeah right!
Aussie spending on online betting increased a massive 142 per cent in the last week of April compared to a normal week, according to analytics group AlphaBeta.
My view?
It’s high time the big banks put their nuts on the line and banned credit cards being used for gambling.
Do it for Graham.
Do it for my ballsy client.
Do it for every kid who has a parent afflicted with this terrible disease.
Tread Your Own Path!
READERS WRITE
MAILBOX BANDIT
ELIZA WRITES: A couple of years ago thieves ransacked the mailboxes in our small apartment building.
We were all shaken up at the time but I forgot about it until last year when I was knocked back for a car loan.
The reason? Someone had been running up buy-now-pay-later loans in my name! It took me months to clear my name — a total nightmare!
BAREFOOT REPLIES: It was probably just kids messing about.
No, seriously.
“Scammers pay kids to go and raid letterboxes” said ACCC chairwoman Delia Rickard in an interview last year. “It is remarkably common”, she declared.
(When I was a kid I delivered junk mail on my BMX for 3 cents a catalogue. I wonder how much the crims pay these days?)
I’ve long thought of my mailbox as being like my mother’s drip tray. “What’s a drip tray?” my Millennial readers ask. It’s a tub used to store recycled fat. Really.
Example: the oil from the Sunday lamb roast would become the fat for Tuesday night’s snags.
Sure, it was a thing when my mother was growing up, but times change, Mum! Buy some freaking oil for god sakes, and make sure it’s the activated almond oil stuff that Paleo Pete loves.
So why am I paranoid?
Because identity fraud is so prevalent: one in four Aussies have been victims of identity crime at some point in their lives, and collectively it costs us over $2 billion a year, according to the Australian Institute of Criminology.
That’s why, in addition to putting a temporary ban on our credit reports (see last week’s column), Liz and I have set up a joint email for all our bills.
The only thing you should be getting in your locked postbox is birthday cards from your aunties … and junk mail delivered by a hardworking kid.
SUPER PUZZLE
EMMA WRITES: I am 18 years old and have just landed two casual jobs, so I need to set up a super account (after finding out that all of my past super from a part-time summer job in 2016 was reduced to $0.14 and then taken by the ATO!).
I have several friends who swear by Student Super as it has zero fees for balances under $1000.
What’s your take? I would really like to have super that does not get reduced to nothing again.
BAREFOOT REPLIES: Can I just say how much you rock for asking me this question at the start of your career?
Seriously, if I wasn’t a daggy father who works in finance I’d do a TikTok dance for you.
Actually, maybe not.
So let’s talk money:
You’re right, Student Super do have zero fees for balances under $1000, which they should be applauded for.
But they need to make some kabana, so after your balance rises to $5000 you’ll pay $78 plus 0.99 per cent p.a.
And that’s way too expensive, especially given you have 50 years or more (!) to compound your money.
It won’t take long to burst through the $5000 barrier. Student Super knows this, which is why they’re trying to lure you in on the front end … knowing they’ll make it back big time on the back end.
So, here’s what would be on my super shopping list:
ULTRA-low fees … preferably under 0.5% p.a. no matter how much you have in the account;
THE option to invest your money into a high-growth index fund and;
NO life insurance until you have dependants (cats don’t qualify).
Don’t worry about fancy apps or snazzy calculators: so long as your fund continues charging low fees, the less you hear from them, the better.
Good luck!
NURSING MY DEBT
SAM WRITES: I know you are probably sick of hearing this … but thank you so much. Four months ago I picked up your book.
I am a single dad who works as a nurse, owns his own home, and works three jobs to make ends meet. I was $3000 in credit card debt, had $750 of my rates outstanding, and a measly but annoying $220 of my car insurance still to pay.
Well, today I domino-ed the last of these debts as I paid off my credit card.
I jumped around my bedroom listening to the song Celebration by Kool & The Gang … I was so proud of myself!
BAREFOOT REPLIES: How impressive are you?
You’re working three jobs — including one of society’s most important jobs — just to get ahead for your kid.
In my book Barefoot Investor for Families, I encourage parents to do a family backyard “bill burning ceremony” — literally setting fire to a paid-off bill, credit card or loan.
They’ll likely remember that night 30 years from now, and the underlying lesson: work hard and get out of debt.
Celebrate good times, come on!
The Barefoot Investor holds an Australian Financial Services Licence (302081).
This is general advice only. It should not replace individual, independent, personal financial advice.
If you have a money question, go to barefootinvestor.com and #askbarefoot
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins)RRP $29.99
Originally published as Time for big banks to ban credit cards for gambling