There's one problem here: by storing passwords in a series of flat files, you give away that a password to a given site or location exists. That alone can be data that a user doesn't want to share.

I use a similar (and old) solution using GPG for password management, however it differs in one important way: it stores passwords in a database rather than a series of flat files. If I combine it with private browsing, I can simultaneously store passwords for particular websites while not letting a random trespasser know I even visit them.