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The Clark Howard Podcast
01.12.26 A Plan For Credit Card Debt / Online Grocery Prices
00:32:33
A Plan For Credit Card Debt / Online Grocery Prices
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- [00:00]
A
Foreign. It's my pleasure to welcome you to the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you so you make better financial decisions in your life. And one decision many people are not thrilled about or one circumstance that people are not thrilled about is how much debt you have in your life right now. And there are some new stats I'm going to share with you. And this is all about not feeling overwhelmed, but developing a plan to get slowly out of that debt and also ordering your groceries online. Is that a money saver or a money ripoff? We're going to talk about that. So Americans did it. We did it over Christmas. We now in January have hit record levels of debt in the United States. Not a record to be thrilled about or proud of. It's interesting because over the last eight years we've been through cycles where we had hit record levels of debt back in 2019. And then for the first phase of COVID debt levels collapsed. Consumer debt collapsed in the United States and people paid down debt at unprecedented levels because particularly during the lockdown phase back in 20, people didn't have places or ways to spend their money and instead they took money they had and put it towards debt. Well then we've had a lot of things happen since then. We've had a terrible inflationary cycle for six years. A lot of people's incomes did not keep up with that. And people close the gap in many cases with credit of various types of. And then over the last couple of years we've had a really ugly new form of debt that has grown unfortunately in popularity in the United States. Pay in four, it's offered like everywhere you go. You know, you don't have to pay right now, just four easy payments that then third of people haven't been able to make and mess up their credit. How are you going to be able to to get this under control? So debt comes from different flavors. There are people who end up in debt simply because they lost a job, they got sick, they don't have enough money for life's basics. And that may be somewhere based on what I've read somewhere around 20% of people that are dealing with debt that has grown and you're just trying to service that debt, that there's maybe 20% of people with the debt that it is all about just trying to survive. For most people though, it has been lifestyle creep. It's been things that you've just gotten in the habit of charging it or tapping to pay when you're out somewhere or thinking should I get that, should I not? Then you see the pay in for sign and you do it. And so first assignment for you, first assignment. And this is the hardest bridge for people to cross. Believe it or not. Harder than paying the debt back is facing the debt you have. You actually got to sit there and write down all the debt you have. Not what payments you have to make in a month, no the debt. How much do you owe for this, how much do you owe for that? How much you owe for this other thing and you make that list and then on it you put the balance you owe, who you owe it to, and what the interest rate is of each of those debts. Then we move to hard stuff because first you got face what you owe. And this is the hard lifestyle change because we're so accustomed to just, I mean with tap to pay you don't feel it. With plastic you don't feel. Feels infinite. And so we don't think enough about the decisions we make. So it starts with this really hard step which is if you know you're running debt, having to pay interest on credit cards. Average interest rate now in the 30s apparently used to be about 25, depends on the card mix you have. That's a lot of percent interest that you're having to pay. And all you're doing is servicing the debt and the debt can keep growing. Are you ready? Are you ready to stop using credit? If all you can do is service the debt and it's not so you can put food on the table, it's things you just buy, you just spend on. If you stop using the credit, that is the second key thing to you, getting things under control. And then that brings to the third step which is you already know what you owe to who because that was the first thing I had you do you know what the interest rates are and then what do you do? You pay the minimums on all the debt you have outstanding except for the one with the highest interest rate. You throw as much at it as you possibly can. You can even look at doing something I've talked about before, I've talked about it actually for 30 years is the advantage. Because credit card interest is calculated daily to make payments more than once a month against your card. Some people now paying, if they get paid weekly, they're paying some towards the credit cards every week. Or if you're paid twice a month, you make two payments a month. Because every day earlier that you get money to the credit card company that's interest that will Never be charged on whatever you paid. And the math shows that even if you're a minimum balance payer, pay the minimum. They require that if you stop using your cards, pay that minimum. And then as your balance starts to drop and they lower the minimum, you don't lower what you pay. And if you pay it every two weeks, half that monthly minimum you start at every two weeks, you will get out of debt and one fourth the time than if you play it their way at the bank whose job it is to keep you on the hook to them with high interest forever. Do you want that? Do you want that? Nobody ever got rich paying Visa or MasterCard 25%. I want money in your pocket. I don't want it in the stockholders pockets at the banks. I want you to have the money. So remember, I'm simplifying this and there are lots of different ways to get it done. But remember the three steps. First, you got to write down everybody owe money to how much you owe them and what the interest rate is. Second, you got to stop using credit if you're running balances where you're paying interest every single month. And third, you come up with a plan to pay these debts if you are overwhelmed, you can't see your way out of it. We have links@clark.com for you to reach a legitimate credit counselor that can help you with budgeting and if necessary, help you with payment plans with people you owe money to. But this is not something you ignore. It's something you attack straight on.
- [08:23]
B
All right, Dan in Ohio wrote into Clark with this. I've had a credit card for more than 10 years and 100% of the time I pay it in full within 48 hours of receiving the bill. But on the statement that just came out, there was an interest charge of $28.39. My previous balance of $248 showed as paid. So I called the credit card company and asked why the interest charge. They put me on a brief hold and came back and said that I was right and there should be no interest. She took it all off and asked if I needed anything else and then hung up. No apologies, no why or how it happened. Please warn others.
- [09:01]
A
So Krista, in this case, I want you to name who the credit card company is.
- [09:05]
B
This was Discover.
- [09:06]
A
All right, so what happened with Discover is Discover was taken over by Capital One. Anytime there's a bank marriage, it turns out to have hiccups. And I don't know if this is going to be a pattern we see with people who have Discover cards that the technology causes errors in the merging of the operations of Discovering Capital One. And I really, I saw, as you were reading, I saw that it was Discover and I was thinking, you know, I should really point out exactly what Dan said, but with a special emphasis for you if you have a Discover Card to look at your statements closely in case there is a hiccup, one that I've not heard, but I know patterns and bank mergers lead to hiccups, and so especially important to check those statements just like you did, Dan.
- [10:03]
B
And then a lot of us have unusually high statements this month because of the holidays, and so it's easier to miss stuff for sure. Okay. Desi in Oregon says thank you for all the fabulous guidance and advice. I've listened for years and have used your tips for a number of decisions, including making frugal decisions that helped me pay off my house several years ago and invest that money. I'm 63 years old. I unexpectedly lost my job two years ago.
- [10:28]
A
Well, I'm thrilled you paid off your house and I'm really sorry you lost your job.
- [10:32]
B
At 61, I invest with Vanguard and use their personal advisor service. I wasn't ready and didn't feel secure enough to retire, even though Vanguard says I'll be fine. So I created a side business where I work 20 hours a week and make plenty to live on. Here's my question. I know.
- [10:49]
A
Door close, window open.
- [10:50]
B
Exactly. Here's my question. I expect to receive a lump sum payment of $20,000 this year. The only debt I have is a HELOC of $47,000 at six and a quarter percent. It's from my credit union, of course. I took it in December of 2022. At 15 years, my monthly payment is $467. I have the option of moving to a lower interest rate with no penalty if the rates come down. I have $3,000 in an emergency fund. I own my home and pay my credit cards in full every month. So I really hate debt. What are your thoughts on what to do with the money? I've been advised to fund my emergency fund to $10,000 and pay the leftover 12,000 to the debt. I could also draw out an additional money from my IRA to pay off the HELOC completely, but probably not in one year as that would move my tax bracket up. I think I will always work a bit as I love my business.
- [11:41]
A
So in circumstances that we hear about, you're in a really good spot here. $3,000 in your emergency fund. That's not enough. At the same time, you said HELOC. I think it's a home equity loan.
- [11:57]
B
It's 15 years.
- [11:58]
A
Yeah. Not a HELOC. He locks a floating interest rate. A home equity loan is a fixed rate. Six and a quarter for a home equity loan is actually a very attractive rate, but it's much more than you're going to earn on your money in the savings account. Whoever advised you to take of the money, the lump sum to take it and basically split it half to build up your emergency fund where if you're shopping around, you'll earn about 3 point something percent on that half of what you're paying on the home equity loan, but then take the other half of it and pay it towards the balance. I actually like that 5050 idea. Even though you're losing some in interest every month between what you're earning on your savings and what you're having to pay on the home equity loan. I like that.
- [12:54]
B
Okay. And then John in Oregon says Clark, you talked recently about the ACATS locks on brokerage accounts. Thanks for letting us know about that. One question though, you didn't mention whether this is something we need to do for an employer sponsored retirement plan like a 401k. And I know you did a video over the holiday about this because a lot so many people wrote in that they couldn't get this done, especially with Schwab. And then they had difficulty with Fidelity and Vanguard. We heard from different people.
- [13:21]
A
Really With Fidelity. Fidelity, Simple.
- [13:23]
B
I know, but just somebody wrote in with that. So I thought I'd.
- [13:26]
A
Okay, so maybe go over it again. ACADS is an automated system that came about because there was a scandal involving brokerage houses that when you were at a brokerage house and you decided, you know, I don't want to be there anymore, I want to move my money to this other investment house. And the brokerages were stalling on purpose. They were not cooperating with allowing your assets out to another firm. So the industry had a spotlight put on it and developed an automated system, acats, to move money from the brokerage you no longer want to be at to the new one. Well, as something that was a good thing, you now having more power to move your money where you want. An automated system has also become a potential risk to you because criminals impersonate you and try to steal your money through the ACATS platform. And that's why I talked about how Fidelity has a simple toggle on your Fidelity Investments account where you lock automatic transfers through ACATS and Fidelity if you've got that lock in place, they have to go through extra steps with you to make sure you are who you say you are and you really meant to move your money from one place to another. And since Fidelity, Vanguard and Schwab are so huge, I talked about how with Vanguard it's a manual process. Schwab doesn't have one yet, and it's exposing you to risk. You shouldn't be exposed to Vanguard. You have to talk to them and say, hey, I want you to put this in place. And depending on who you get at customer no service, they know what you're talking about or they don't. And Schwab get this together. You should have a procedure. In Vanguard and Schwabisch, you should both do a simple system where your customers can put this lock in place to prevent the theft of money you may have worked a long time or a lifetime to save and invest for your financial security, for your future, for your retirement. Which brings to the question you asked about 401s so 401k providers. Many also use the ACAT system and other than Fidelity, I don't know others that have a simple lock you can put in place. This is something the industry always industries are a little behind what the criminals are up to. And so the people coming in and stealing money through ACATs are something the industry is reacting to instead of upfront protecting people from that happening. And so again, I want to congratulate Fidelity and For many fidelity 401k plans, apparently you can simply put in an ACATS lock and this needs to be standard industry procedure and practice to protect your money. Coming up ahead, we're going to talk about groceries and is it a good thing or a bad thing to buy your groceries online? Is it a money saver or is it going to cost you? I want to tell you my perspective on it.
- [16:49]
C
We all have moments when we could have done better. Like cutting your own hair. Yikes. Or forgetting sunscreen. So now you look like a tomato.
- [16:58]
B
Ouch.
- [16:59]
C
Could have done better. Same goes for where you invest. Level up and invest smarter with Schwab. Get market insights, education and human help when you need it. Learn more@schwab.com we all have moments when we could have done better. Like cutting your own hair. Yikes. Or forgetting sunscreen. So now you look like a tomato.
- [17:22]
B
Ouch.
- [17:23]
C
Could have done better. Same goes for where you invest. Level up and invest smarter with Schwab. Get market insights, education and human help when you need it. Learn more@schwab.com.
- [17:38]
A
A lot to talk about with buying groceries online. First things first, you may have heard all the stuff with Instacart, maybe you haven't. Instacart has been going down the same rabbit hole as Delta Airlines has, experimenting with individualized pricing, charging some people more money than others or less than others. Some people a lot more than others based on what AI says that individual is willing to pay. Delta has gone very mum on this after there was a lot of negative coverage of the fact that Delta was doing discriminatory individual pricing and Instacart was doing it secretly. Instacart was charging different people different prices for the same grocery order. Same grocery items being ordered from the same supermarket. People who the Instacart AI thought were willing to pay more were paying 20% more for groceries than people that Instacart thought were price sensitive. After a wave of negative coverage, Instacart discontinued the dynamic AI powered pricing. And Instacart said that it was all misinformation. Yeah, okay. Just know that this is going to be a challenge for us as more and more businesses try to ferret out who's price sensitive, who's not, and charge individualized pricing. That if the pattern that the AI tools a company's using say you're really somebody who's cheap, you're going to be offered cheaper prices. If you're somebody who they think doesn't care as much about what the price of something is, then they're going to charge you more money, period. It's something that's still unclear how this is all going to play out. I'm sure there will be states that pass laws banning individualized pricing where each individual is charged a different thing. But it's going to take a while for this all to play out. Which brings to the other thing. When you order groceries through Instacart or their competitors, you're paying usually a higher price than what items cost in the store. And so then obviously you're paying a convenience charge that in theory could actually not cost you as much extra as you might imagine because you don't impulse buy the same way when you're not in person. But any of these third parties like Instacart face a challenge from Walmart and Amazon. Amazon is now doing same day deliveries in a huge number of metro markets in the United States. And this is different than Amazon's initial thing. They were doing where the groceries were coming from whole paycheck. Now these are regular groceries. They can be organics as well, but they're not Priced like in a whole paycheck, they're priced to be competitive in the market. This is a response to the enormous success of Walmart plus grocery delivery which has been a huge success and moved market share to Walmart for groceries and other items in the store. As Walmart now serves two different kinds of customers. People that come in person and people who just want convenience delivery of food and non food items. If you order as a Walmart plus member, you order as an Amazon prime member. In either case the groceries are not being marked up from what they would be in a physical location. And so you have the double advantage, you have the convenience, you're not paying more for the items and you don't do the impulse purchasing. So in that case I think it's an absolute great win. Where might it not be? What's been the big complaint about Walmart plus grocery delivery? The quality of the produce, the fruits, vegetables, produce that's delivered you probably on your own going into a store are more particular with the produce you would get. Then store picker is going to be who is going around. If you've been in a Walmart, you see the, the Walmart plus shoppers, the Walmart employees, they're having to fill these orders as quick as they can and they're not able to sit there and look apple to apple to apple and look at this banana and that banana and figure out which one looks most like you want it. And Krista, you've been ordering from Amazon the groceries. How have produce items been?
- [22:53]
B
They've been great. I mean I had issues like a while ago when I used to order groceries but I've had no problems recently, so. And I don't order a ton. It does save me money because I don't do the impulse buys that I do when I go to the grocery store. So I don't do it every time but I order probably once every two weeks. I'll order like my staples produce staples are included in that.
- [23:15]
A
So so far so good.
- [23:17]
B
Yeah.
- [23:18]
A
And you've never compared the prices. I, I'm putting words in your mouth but I don't think you've compared Walmart plus groceries to Amazon. Now historically Walmart has been about 20% cheaper than traditional supermarkets. I've not seen any price surveying yet of the new Amazon Grocery same day grocery delivery to know whether or not the prices are competitive with Walmart. Maybe that's something someone should do. But I think a lot of people who are industry analysts for the supermarket industry look at Walmart plus shoppers is different than Amazon shoppers, and I'm not sure they are now that Walmart plus attracts a much higher income customer.
- [24:08]
B
Yeah, we should do that. We should figure that you're a Walmart plus member. You could like get an equal like the same cart and see what the difference is.
- [24:16]
A
Okay.
- [24:17]
B
All right. Well, let's go to questions. Dan in New Jersey wrote in with this one just this month. Strikes have occurred at Telluride ski resort in Colorado as well as the Massif in Quebec, forcing the resort, forcing the resorts to close. Fortunately, I haven't booked a trip to these resorts, but I was wondering, is there travel insurance that would cover this risk?
- [24:37]
A
To my knowledge, and I've done a lot of reading, I don't know this resort in Quebec, but I've done a lot of reading on the strike going on at Telluride and people have just been out the money. Actually, people said their trip insurance didn't not cover the strike. And so I'm not aware of any travel insurance that covers work actions, work stoppages like what's happened at Telluride. It's been hard for everybody in the town and in the area of Telluride from this strike. And it's gotten into a real tussle with the owner being an absentee owner who has not been willing to talk to the media about it or talk to the strikers.
- [25:29]
B
Elaine in Maryland says, hi, Clark. I don't think I have a question because I already paid the fee, but here's what happened and I want your followers to know it's out there. I bought a decorative tray on Etsy for my son for his birthday. I paid for the tray in shipping and I received the tray a few days later. Yay. A couple of weeks later, December 27, I got a bill from UPS. At first I thought it was junk mail, but they had all the details of my purchase. It was the tray. I didn't realize it was coming from Canada and I had already paid the shipping. Turns out it was a tariff fee, $16. I had already paid $15 for shipping. So basically getting the tray to my son cost me almost as much as the tray. Lesson learned. No more ordering from outside the US for now, anyway.
- [26:13]
A
So this is the hard part with this is you don't know often where goods are coming from. And so you get that bonus gift you weren't looking for. And that's the tariff bill from the carrier. You know, in this case UPS. It's a nightmare for UPS, FedEx, any other carrier to have to be in the business Being the bad guy, collecting the tariffs and you don't know when that's going to happen on an item or not. So source of origin, if you can figure it out has become so important now because the tariffs against a number of countries are extremely high.
- [26:57]
B
And Danielle in Oklahoma wrote this one Clark, I've been following your advice for years. I found you when I had no choice but to save money because I literally couldn't afford to live. Over the years I've been incredibly blessed with making my way up the ladder and now having a very good paying career. Saving money is still a hobby of mine and no matter how much I have, I'll always look for the best deal. A good friend of mine has had a very rough few years and her sweet child is now on hospice. Additionally, other family members of hers have had some serious medical issues. Thanks to everything I've learned from you, I have more than enough of a nest egg. Several times Insurance has initially rejected a medication and I've told her just put the $1700 on my credit card. If insurance pays, pay me back. If not, I can't take it with me. Thank you for teaching me so much that I can help my friend. I'd like you to consider changing your sign off to spend less, save more, have the ability to help others out and never ever let anyone rip you off.
- [28:00]
A
First of all, you are a generous soul. No doubt that you take your hard earned money that you have worked so hard to live on less than what you make and save and shown your generosity with big time expenses for a friend is just incredible. I love the example of the kindness and charitable nature that you have. I want to say something about the insurance company rejections and this is something we covered twice last year and that is how often nobody ever appeals an insurance company rejection and that overwhelmingly when people appeal a rejection, they win. Not every time, but overwhelmingly. The insurance companies are playing the odds though, knowing that most people never appeal. But your kindness is a warm, wonderful example to all of us and also.
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B
Congratulations on turning things around.
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A
Yeah, how about that over the years?
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B
It's inspiring.
- [29:12]
A
And you also overcame what's known as mpc, the marginal propensity to consume, which is as people's incomes rise in the United States, worse than more stark than anywhere else on earth that I know of. Our spending rises directly in tandem with the rise in our income. You managed to fight that and as your income went up, you accumulated savings, assets and security, which is culturally something we're not wired to do in the United States. But you doing that made it possible for you to be the generous soul you have been for your friend and their child in hospice. Thank you for your inspiration, and thank you so much for joining us on today's podcast, which is all about you being empowered with knowledge. Like looking at our newsletters@Clark.com and ClarkDeals.com that are free to subscribe to at Clark.com newsletters or newsletter. Either one will get you to where you sign up. Our newsletters are free. If you find them not useful, you can unsubscribe very easily. If you find them, great. Tell other people it's all about what we do in so many different ways to serve you with advice and information that empowers you so you can see save more, spend less and avoid getting ripped off. And we'll see you on Wednesday.