An opinion piece from the Barefoot Investor.
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.”
In most states in Australia the Rental Code requires that real estate agents provide at least one fee-free way of paying rent. Rental Rewards gets around it by accepting cheques. 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 cherry-picking the data: there was NOTHING on the Qantas Store for sale for 1,000 points.
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 property managers who respect the person paying off your asset.