03.03.25 The Consumer Financial Protection Bureau / Warehouse Club Competition

Summary

The Clark Howard Podcast – Episode 03.03.25: The Consumer Financial Protection Bureau & Warehouse Club Competition

Release Date: March 3, 2025

In this insightful episode of The Clark Howard Podcast, Clark and his co-host delve into significant topics impacting consumers today. The discussion primarily revolves around the Consumer Financial Protection Bureau (CFPB) and the evolving warehouse club competition, particularly between Sam’s Club and Costco. Additionally, Clark addresses a series of listener questions, offering expert advice on various financial and consumer-related issues.

---

1. The Consumer Financial Protection Bureau (CFPB)

Timestamp: [00:44] – [07:13]

Clark Howard begins the episode by expressing his deep concern over the current challenges facing the CFPB. He emphasizes the bureau's crucial role in safeguarding consumers against malpractices by major financial institutions.

• Clark Howard: “The Consumer Financial Protection Bureau is something I really believe in. I was an advocate of its creation… It gave you as a consumer a place to go to get help if you were having a problem with the bank that was ignoring you…”

He critiques the recent attempts by influential figures like Elon Musk to undermine the CFPB, arguing that such moves could leave consumers without a necessary safety net. Clark highlights the bureau's effectiveness in the past, citing its role in fining companies like Cash App for systemic issues that harmed consumers.

• Clark Howard: “Having an ability to file a complaint like you [e-mail]… It is an organization that a lot of people have really benefited from. But now if you go to their website, it's almost non-functional…”

He laments the potential extinction of the CFPB, pointing out that without it, consumers are left vulnerable against the overpowering presence of the four major U.S. banks: Chase, Citibank, Bank of America, and Wells Fargo.

---

2. Warehouse Club Competition: Sam’s Club vs. Costco

Timestamp: [18:07] – [22:58]

Transitioning to the retail sector, Clark shares his enthusiasm for warehouse clubs, particularly focusing on the dynamic rivalry between Sam’s Club and Costco. Historically, Costco has been the leader in this space, renowned for its exceptional customer service and high-quality merchandise.

However, recent developments have seen Sam’s Club leapfrog Costco in terms of customer satisfaction:

• Clark Howard: “According to the American Customer Satisfaction Index, Sam's Club has blown past Costco on customer service. Costco's customer service has not declined. Costco remains at the very top… But Sam's has blown past it and has.”

Clark attributes Sam’s Club’s success to innovative leadership and technological advancements. He highlights features such as the Plus Membership with free delivery and the integration of AI-powered checkout systems. These innovations have significantly enhanced the customer experience, making shopping more convenient and efficient.

• Clark Howard: “With the app, you ring yourself up. Because they have 8 million cameras hooked up to AI… you now in most cases don't even have to show a receipt… you just walk right out of the door.”

Despite Costco maintaining superior merchandise quality, Sam’s Club has excelled in customer service and operational efficiency, positioning itself as a formidable competitor in the warehouse club arena.

---

3. Listener Questions and Expert Advice

Throughout the episode, Clark fields a variety of listener questions, providing detailed and practical solutions.

a. Credit Card Processing Fees

Listener: Ryan from Alaska
Timestamp: [07:13] – [10:17]

Question: Are merchants allowed to claim credit card processing fees passed onto customers as business expenses, potentially leading to double-dipping?

Clark’s Answer:

Clark clarifies that merchants are not double-dipping. When a merchant adds a surcharge (e.g., charging $103 for a $100 service), they report the total ($103) as revenue and the additional fee ($3) as a business expense.

• Clark Howard: “When a merchant charges you... they're reporting revenue on their taxes of 103. As far as you are concerned, it's $100 for the service, $3 for the surcharge… they're reporting gross revenue and the processing fee as an expense.”

He also references international practices, noting that places like Australia have similar fee structures, often with transparent and minimal surcharge amounts due to high transaction volumes.

b. Returning an Unopened Item to Temu

Listener: Tony from Georgia
Timestamp: [10:26] – [12:09]

Question: Difficulty in returning a high-value item to Temu, a Chinese seller, with no effective customer service.

Clark’s Answer:

Clark advises using alternative contact methods like elliot.org to reach Temu’s customer service. If unsuccessful, he suggests initiating a chargeback through the credit card issuer as a last resort.

• Clark Howard: “Your only other option is to do a chargeback… which is ultimately what they were talking about to you…”

He warns about the risks associated with international sellers like AliExpress, where consumers often face challenges in obtaining refunds or resolutions.

c. Maximizing Credit Card Points for Large Purchases

Listener: Jay from Georgia
Timestamp: [13:13] – [16:25]

Question: Best credit cards to use for purchasing $40,000 in plane tickets to maximize travel points.

Clark’s Answer:

Clark recommends opting for premium travel credit cards that offer substantial sign-up bonuses and high reward rates on travel purchases. He suggests the American Express Platinum, Chase Sapphire Reserve, and Capital One Venture X as top contenders.

• Clark Howard: “You want to look at the big three of the travel cards… American Express Platinum… Chase Sapphire Reserve… Capital One Venture X… see which one has the best sign up bonus right now…”

He emphasizes leveraging these cards for large transactions to accumulate significant points, which can translate into substantial future travel savings.

d. Cash-Free Payment Options for Teenagers

Listener: Lucas from Washington
Timestamp: [23:22] – [25:56]

Question: Safe, cash-free payment options for a 15-year-old, avoiding the risks associated with debit cards.

Clark’s Answer:

Clark recommends using digital wallets like Apple Pay or Google Wallet as safer alternatives to traditional debit cards. These platforms generate randomized codes for transactions, mitigating the risk of fraud.

• Clark Howard: “Use Apple Pay or Google Wallet… it generates a randomized code that is useless to a criminal and bypasses the scammer.”

He advises against using debit cards at vulnerable points like gas pumps, suggesting contactless payment methods instead to enhance security.

e. 401(k) Participation Limitations

Listener: Sutton from Pennsylvania
Timestamp: [25:56] – [29:54]

Question: Facing restrictions on 401(k) participation due to income limits and seeking ways to maximize retirement savings.

Clark’s Answer:

Clark explains the regulatory background that restricts high-earning employees from participating in certain 401(k) plans to ensure non-discriminatory benefits. He advises Sutton to:

1. Utilize Roth Accounts: If eligible, contribute to a Roth IRA for favorable tax treatment.
2. Open a Personal Investment Account: Invest in diversified index funds or ETFs with tax-efficient strategies.
3. Leverage Long-Term Capital Gains: Benefit from lower tax rates compared to traditional 401(k) withdrawals.

• Clark Howard: “Take that money you would have put in the 401k… put it in an investment account… long-term capital gains have a much lower tax rate…”

He underscores the importance of proactive investment management to compensate for limited retirement plan options.

f. Car Maintenance Advice

Listener: MP from Connecticut
Timestamp: [29:54] – [31:51]

Question: Conflicting recommendations on oil change intervals for a Volkswagen car driven 20,000 miles annually.

Clark’s Answer:

Clark advises strictly adhering to the vehicle’s owner’s manual for maintenance schedules, rather than external recommendations. He emphasizes the importance of:

• Following Manufacturer Guidelines: Use the specified oil type and change intervals as recommended.

• Documenting Maintenance: Keep records to support warranty claims if needed.

• Clark Howard: “Go by the owner's manual… do that and keep records of it. If there's ever an issue involving a warranty claim…”

This ensures the vehicle remains in optimal condition and preserves warranty coverage.

---

Conclusion

The episode concludes with Clark reiterating his commitment to empowering listeners with financial knowledge and practical advice. He encourages continuous engagement through various platforms like YouTube, radio, and his websites (clark.com and ClarkDeals.com), emphasizing the mission to help consumers "save more, spend less, and avoid getting ripped off."

• Clark Howard: “It's all about empowering you with knowledge so that you can save more, spend less, and avoid getting ripped off. And see you next time.”

---

Key Takeaways:

1. CFPB’s Vital Role: Protects consumers from financial misconduct; its weakening could leave consumers vulnerable.
2. Sam’s Club vs. Costco: Sam’s Club has recently surpassed Costco in customer satisfaction through innovation and superior service.
3. Practical Financial Advice: From optimizing credit card rewards to safe payment methods for teens, Clark provides actionable tips.
4. Retirement Planning: Alternative strategies are essential when traditional 401(k) options are limited due to income restrictions.
5. Consumer Vigilance: Following manufacturer guidelines and leveraging digital tools can safeguard against financial and consumer pitfalls.

This episode of The Clark Howard Podcast serves as a comprehensive guide for listeners navigating the complexities of financial protection, retail choices, and everyday consumer decisions.

Transcript

[Clark Howard]

Get the Angel REEF Special at McDonald's. Now let's break it down. My favorite barbecue sauce, American cheese, crispy bacon, pickles, onions and a sesame seed bun, of course. And don't forget the fries and the drinks. Sound good?

[Co-host]

I participate in restaurants for a limited time.

[Progressive Insurance Ad]

This podcast is brought to you by Progressive Insurance. Fiscally responsible financial geniuses, monetary magicians. These are things people say about drivers who switch their car insurance to Progressive and save hundreds. Visit progressive.com to see if you could save Progressive Casualty Insurance Company and affiliates. Potential savings will vary. Not available in all states or situations.

[Clark Howard]

It's my pleasure to welcome you here to the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you to make better financial decisions in your life. In today's show, I'm being constantly asked how I feel about what's happening to the Consumer Financial Protection Bureau. I'm going to talk about that straight ahead. And also today, if you've listened for a long time, you know how much I love Costco. We have a dog right now named Kirkland Signature. We had a light dog, one that's passed away that was named Costco Wholesale. I love that place. But it seems that there's a shift in the marketplace and there's another store that people love even more than Costco. I'm going to talk about that later. Okay. So the Consumer Financial Protection Bureau was the initial primary target attacked by doge by Elon Musk as a part of the federal government that he wanted to destroy. And the Consumer Financial Protection Bureau is something I really believe in. I was an advocate of its creation. And the aftermath of the banking scandals of, gosh, we're getting closer to it being almost a generation ago, the banking scandals that led to the Great Recession and all the high unemployment and the House foreclosures and all that, because banks run amok, breaking the law more than 15 years ago, closing in on 20. And so the Congress chose to put in place the Consumer Financial Protection Bureau, which gave you as a consumer a place to go to get help if you were having a problem with the bank that was ignoring you or a credit bureau that had false information about you on your report and they were ignoring you about various things involved with your and my wallet. And I can understand how the world's richest man, Musk, doesn't understand how important this is to everyday people because your money, you worked hard for it. And if it vanishes from your bank account or whatever and you can't get any help from your bank having a place to turn consumerfinance.gov to file a complaint. And it is an organization that a lot of people have really benefited from. But now if you go to their website, it's almost non functional now. First, I hate that the Consumer Financial Protection Bureau is at risk of going extinct. Second, there needs to be some procedure which we've never had before it where you as a consumer, if you're having a problem with a financial institution, there's some accountability. And you think now how rough this is because you've got four banks in the United States that account for more than half of all banking. And they are so large, they're so powerful and they're so bureaucratic that they can do pretty much whatever they want. Those four, if you're not aware, Chase, Citibank, bank of America and Big Bad Wells. And so these financial institutions really can do whatever they wish. And often it's what they don't do. And a lot of times our experience with problems that consumers have had is that it's not so much that the bank is trying to cheat them, it's just it goes into the bureaucratic ether. And so having an ability to file a complaint like you [e-mail], which you still can do. If you go to consumerfinance.gov the page looks dead, but in the upper right hand corner you'll see a click you can click on to file a complaint against a financial institution. Before, when the Consumer Financial Protection Bureau was not under siege, if there was a pattern of complaints against a particular organization, like the thing that happened with Cash App, where people's money was disappearing on Cash App. And Cash App had no active procedure for a consumer to be reconnected to their money. And so they got fined for it and they had to agree to start doing right by its customers. Now what will happen is if you file a complaint@consumer finance.gov, it will then go to the financial institution and you hope that they'll do something about it. But in the past, what would happen is they'd look for patterns. And if there were continuous complaints that were same or similar, it it might lead to an investigation to see if there were systemic problems at a financial institution mistreating consumers, we're not going to have that, at least for now. And I think that's a shame. So that's my beef, is that this is something that has been very, very useful to my fellow Americans, especially those who don't have a lot of money with an institution you know, when you are wealthier and you've got a lot of money at a big bank or at a brokerage house or whatever, you have access to completely different resources at that financial institution. Completely different level of people not just calling customer, no service. And so wealthier individuals, these things are not problems. But for everyday people who have a problem with money, you desperately need to pay your car payment or pay your rent or pay your mortgage. That's where having a cop on the beat has been so useful. And I get it. I mean, you know, if you have how many hundreds of billions of dollars, whatever Musk has, he's not going to get it. He's not going to understand because he can pick up the phone and talk to the CEO of any financial institution. The rest of us, good luck with that.

[Co-host]

All right, let's go to something we can help with. Questions. This one came from Ryan in Alaska. A lot of businesses that allow customers to pay for goods and services with a credit card are charging the customers an extra credit card processing fee. You can clearly see this on restaurant checks, contractors doing home repair, auto repair shops, just to name a few. I understand that by accepting credit card payments, the merchants incur processing fees from the credit card companies and are passing those fees onto the customer in a cost cutting effort. My question is, are these merchants then allowed to claim those same credit card fees that they paid to the credit card companies but were actually paid by the customers as a business expense for tax purposes? My wife runs a sole proprietor business and every year the credit card processing fees are listed as qualified business expenses expense. Are these merchants double dipping?

[Clark Howard]

That is a great question. And they're not. Because what happens is when a merchant charges you, let's say something was $100, let's say, and they charge you 103, they're reporting revenue on their taxes of 103. As far as you are concerned, as a customer who's $100 for the service, $3 for the surcharge, when they do their tax return, they're reporting gross revenue and that would include whatever processing fee. And I can tell you where this is going. I just returned days ago from Australia. And every place you go in Australia, you pay the merchant fee. You tap to pay at a convenience store with a credit card, you pay the cost of the item plus whatever the merchant fee is. And they can only pass on to you their exact cost. The funny thing was I went to Aldi several times while I was in Australia and the merchant fee that was charged, they must be able to negotiate because of their volume, such low fees. One time it was 3 cents, another time it was 11 cents. But every time you buy something with a card there, you pay at a hotel, you pay your bill, you settle up at the end and it'll show you. And at many of them there will be an electronic thing showing you use MasterCard. This is what the fee will be. Use American Express, the field, be this Visa, it'll be that. Use a debit card. The fee will be this other thing. And very few places take cash there. So you're going to pay some kind of fee. It's just a matter of what it is. And I think there's no question as this practice spreads around the world that it will become commonplace here in the United States.

[Co-host]

Just to be clear. So what happens is when you were saying the revenue is increased, you the merchant reports $103 and then they have a $3 tax credit for the expense of the income and the expense offset each other and it's neutral. So that's why it's not double dipping.

[Clark Howard]

See, this is why when I took accounting courses, I was not very good at them because your explanation was so much better.

[Co-host]

I don't know about that.

[Clark Howard]

All right, I accept.

[Co-host]

Tony in Georgia says I'm having an issue with returning an unopened item back to Temu. I've been trying to return it since January 12th. When contacting them, you can only text. They give you several agents that are well versed in apologizing. I've sent paperwork from my bank that states that they have received their money and should send us a return label. Yet they refuse and don't provide a live human to speak to. They have a 90 day return window and only speak of a chargeback. This purchase was a pressure washer and was over $500 and is still wrapped by my front door. They have no phone number and my state's attorney, Secretary of State has no contact for them.

[Clark Howard]

Okay, so TEU is one of the deep discount Chinese sellers that is controversial with a lot of people. Most of the items they sell are not going to be over $500. A lot are under 10 or $20. Some are even just a dollar or so and customer no service is part of the equation with them. Elliot.org which gives you alternative ways of contacting an organization has customer service contacts for TEMU that hopefully will be able to get you that return label you need. Go to elliot.org look for the Temu customer service contacts and give that a try as well. Your only Other option is going to be to do a chargeback, which is ultimately you said what they were talking about to you and the gibberish of customer no service you were getting from Temu. And while we're at this, I should mention the AliExpress problems that people are having.

[Co-host]

Can I just also say January 12th? So it's just about like you just 60 day window but with foreign transactions, don't you?

[Clark Howard]

So you may or may not. It's up to your credit card issuer if you even have a chargeback. Right. With an international transaction. AliExpress, which is the original seller of cheap goods from China, there have been a lot of publicized cases where people end up getting nothing. Like one of the things that was in the news recently was somebody ordered an item from AliExpress and what they received was a picture of the item instead of the item itself. And so know that it is a pretty crazy environment with these cheap Chinese sellers. And you have to know that with the reward of the very cheap price comes the risk of what might actually show up and what happens when they don't deliver. Getting customer satisfaction or service after the fact when a problem has occurred very, very hard.

[Co-host]

Jay in Georgia says Clark vowed to buy about $40,000 in plane tickets for a once in a lifetime family trip overseas.

[Clark Howard]

Oh my goodness. 40,000.

[Co-host]

That's a car.

[Clark Howard]

Is that a round the world trip?

[Co-host]

Yeah. What's the best credit card or cards to use for this? I'd like to rack up as many points as I can from this transaction for future travel. I already have a Chase Sapphire Preferred card and I can use that for a couple of the tickets if it's the right move.

[Clark Howard]

That would not be the right move. The Sapphire Preferred card's a good card, but not for someone who's doing mega travel at mega expense. You want to look at the big three of the travel cards, see who has the best sign up bonus right now and who gives you the best reward for booking those airline tickets right now. What are the big three? They're the American Express Platinum card that has a monster annual fee of right at 700 bucks. The Chase Sapphire Reserve, which is a huge annual fee I think of 550 or 595 five one or the other. And then the third would be the Capital One Venture X card. Look at each of those. See which one has the best sign up bonus right now and which one gives you the best times x, you know, 5x or whatever for buying these $40,000 in airline tickets through the card. And you'll end up with an enormous bonus. I have a friend who signed up for a promotion. There was a limited time promotion on the Capital One Venture X business card that got 500,000 points bonus as an initial sign up for that card. These special promotions come and go, but what you want is you want whatever the best one being offered right now that you can get for this trip. And you know going forward, if this is once in a lifetime, as you said, you're never taking a big trip again, then take advantage of that initial sign up the points you're going to get from the initial purchases that you're going to make for this big trip and then take other trips with the points and then cancel that card probably after the second year unless you get the true travel bug like I've got and you keep traveling again on an ongoing basis. So if your head spinning at me talking about spending 400 to $800 in an annual fee on a card if you get the equivalent of points rewards that are worth many, many, many thousands of dollars. That's why it's especially worth doing as an upfront thing before a giant purchase. Coming up ahead, we're going to talk about how to save money on your purchases and where that's really happening for people and where they're the happiest doing it.

Get the Angel REEF Special at McDonald's. Now let's break it down. My favorite barbecue sauce, American cheese, crispy bacon, pickles, onions and a sesame seed bun of course. And don't forget the fries and a drink. Sound good?

[Co-host]

I participate in restaurants for a limited time.

[Progressive Insurance Ad]

This message is brought to you by Apple Card. Apple Card is everything a credit card should be. It's easy to manage, built to be secure, and gives users up to 3% daily cash back on every purchase. The best part about Apple Card is applying is quick and easy. Apply in the Wallet app on your iPhone and see your credit limit offer is minutes subject to credit approval. Apple Card by Goldman Sachs Bank USA Salt Lake City Branch Member FDIC terms and [e-mail] Would you wear the same.

[Co-host]

Shoes for every occasion or rock the same outfit seven days a week? Of course not. Your style is better with options. Your investments could be too. CBOE Index options give you access to various contract sizes, global trading hours and potential tax advantages. That's a good look for any portfolio. If you're ready to invest in style, head to betterwithoptions.com There are risks associated with Sebo Company products. Review the disclosures and [e-mail] USDisclaimers My.

[LinkedIn Ad]

Dad works in B2B marketing. He came by my school for career day and said he was a big roas man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laugh at me to this day.

[Co-host]

Not everyone gets B2B, but with LinkedIn you'll be able to reach people who do. Get $100 credit on your next ad campaign. Go to LinkedIn.com results to claim your credit. That's LinkedIn.com results. Terms and conditions apply.

[Clark Howard]

LinkedIn the place to be to be I love competition. I just love it. It's why I'm so much a free enterpriser, why I love capitalism so much. Because as you put people in competition with each other, there's such a sense of urgency to improve or go extinct. I think about how in retail, so many retailers go out of business repeatedly. I mean all the time. Big players, small players. It is the ultimate form of capitalism because if you're not serving the customer, if you're not adapting to changing tastes, you lose your place in the marketplace. You got to have the prices right, the service right, the products right, or you're going away. Adapt or die. Who's adapted recently? So in the warehouse club space, which is where I live my life, I'm wearing a Sam's Club private label shirt right now. For those of you watch the YouTube show, you can see my very high quality $8 shirt I'm wearing. It's members Mark Private Label from Sam's and I'm a member of two of the three warehouse club chains, BJ's Wholesale. I'm not a member of have been in the past. Sam's and Costco. And Costco has always been king of the hill. But now, according to the American Customer Satisfaction Index, Sam's Club has blown past Costco on customer service. Costco's customer service has not declined. Costco remains at the very top of the heap of all retailers in terms of customer service. But according to the American Customer Satisfaction Index, Sam's never has been close to Costco and now has blown past it and has. I think it's tied for the highest customer service score of any retailer, any size, shape, whatever. How Sam's done it well, Sam's has always been the redheaded stepchild of Walmart and there's been a constant revolving door of leadership at Sam's Club and they've never been able to get their act together. Truthfully, the average Costco location sells more than double the Dollar volume per year of the average Sam's club. And it's just because they haven't performed well at Sam's. But they have leadership now that has been so innovative and has really been forward thinking. And I've mentioned some of the stuff like with the plus membership with the free delivery. A lot of plus members very unhappy. Sam's went to a $50 minimum order for free delivery. But the reality is the the delivery service has been great. Costco will deliver, but you pay more for delivery than you do for the same item. In the warehouse club Sam's you get the convenience of delivery if you pay the plus membership. And it's been great. I've loved being a plus member and having the free delivery. But what I love, love, love is how with the app with Sam's you ring yourself up. And because they have 8 million cameras in the warehouse club hooked up to AI when you go to leave a Sam's, you now in most cases don't even have to show a receipt to anybody or anything like that. All the AI knows you're good to go and you just walk right out of the door. So think about if you're in a warehouse club location on a busy weekend and you're in a Costco and the lines for the self checkout are back way into the store, the lines for cashiers way, way back in the store, it's Sam's. You just can walk right out the door because you rang yourself up right on your own phone. So that's why Sam's has leapfrog Costco by improving the overall customer experience. I believe the stores are still more as retailers say their merchandise better at Costco. The goods they have to me are more creative at Costco but the customer experience at this moment is superior at Sam's Club.

[Co-host]

I was just telling someone yesterday, a friend of mine how I remember years ago you said somebody asked you if you belong to any clubs, meaning like country clubs. You pulled out your warehouse membership. You were like, I belonged to three clubs at the time. And you pulled out your membership cards. I love it.

[Clark Howard]

Yeah. You know it's funny because I am a member of two private clubs.

[Co-host]

You sure are.

[Clark Howard]

Yeah, that's my thing.

[Co-host]

Lucas in Washington says I am 15 and looking for cash free payment options. I do have a debit card, but thanks to you I know about the dangers of using it. What payment apps and or types of credit cards make the most sense for teenagers. Thanks for all your work. I'm a third generation Clark listener.

[Clark Howard]

Well, I love that Lucas and you know the cash free payment option. There is a way to potentially make a debit card SAFER because at 15, that's generally where you're going to end up. You're not going to obtain a traditional credit card unless your parents made you an authorized user. On one of those is to use Apple Pay or Google Wallet is the only way you use a debit card. It is a safer way. You never want to use. This is a never rule. You never want to use a debit card at pay at the pump at a gas station next year when you start driving and you're having to buy gas because skimmers have become an even bigger problem than they have been. A skimmer is where criminals put a device on the credit card reader at a gas pump and they're able by remote now to steal the numbers and information off of a debit card and steal whatever money you have in your account within minutes. The way you defeat that is something that unfortunately most banks have not gone to and that's having a chip built into a debit card. If it's a chip reader and you tap the chip reader at the gas pump, then it's okay because that works like Apple Pay or Google Wallet. It's generating a randomized code that is useless to a criminal and bypasses the scammer. By the way, with a credit card, don't do pay at the pump where you insert it in. You want to do tap to pay with your credit card just as you would with the debit card. Because even though you're not going to lose money like you would with the debit card, the hassle of a criminal suddenly being able to duplicate your credit card, make charges, you got to dispute them and all that and get a new card with new numbers and all that pay at the pump is dangerous.

[Co-host]

Sutton in Pennsylvania says I work for a Fortune 200 company that limits 401k participation to employees earning under $135,000 a year due to past non discrimination testing issues. Those above that threshold can only contribute to a non qualified deferred compensation plan with a single bond index fund and mandatory distribution upon leaving.

[Clark Howard]

Oh boy.

[Co-host]

This setup severely limits long term retirement growth. And I estimate the opportunity costs could be in the $1 million range if I stay for 10 to 15 years. I've been championing changes internally now not just for my own benefit, but also because I see it as a challenge for attracting and retaining talent. But it's not gaining traction. What do you recommend I do to maximize my retirement savings given these restrictions.

[Clark Howard]

All right, so first I should give an explanation if you're not familiar with the backstory on this. So there are companies that the bosses only care about themselves and they offer a 401k really for the idea of feathering their own nests. And they don't make the plan generous enough to attract enough lower paid employees into the plan. So under federal law, what happens is then people who are at the higher end of the earning scale of that employer are unqualified now to participate in the 401k to try to bring about behavior at a company that will encourage the company to do things to make the plan more attractive to lower earning employees. What would the match, what would that be? The match, number one thing, where you match money for your employees and get more participation from them. And so it's a carrot to that stick I just talked about so that highly compensated people can also participate. So you're left with something called a non qualified plan, which I need to, I need to emphasize because we've heard from people who've lost the money that was in a non qualified plan. And an employer non qualified means you're not covered by ERISA, the Employee Retirement Income Security act of 1960, whatever. So if the employer gets into financial trouble, let's say they're bought by private equity, that strips assets and the company goes bust. So does the money you have deferred by putting in the non qualified plan. So they have high risk to them and the investing choices you have are limited and you get that full distribution when you leave, creating a maximum taxable event. The alternative for you is to avoid retirement plans if you're not eligible for a Roth, put in. If you are put in at least what you can put in a Roth, that's not enough if you're a highly compensated individual. Instead what you do is you take that money you would have put in the 401k if you were eligible and put it in an investment account. In index funds or the equivalent exchange traded fund there would be an index like a total stock market index fund, international index fund, maybe a little bond index money. The tax treatment is extremely favorable. You are not limited to selling in retirement only and your earnings are taxed, but they're taxed at long term capital gains, which is a much lower tax rate than what you have with tax deferral. In a traditional 401k where you don't pay tax up front, but when you spend the money, everything's taxed, the money you put in because it was never taxed. And all your earnings are taxed at a rate roughly double what you are on capital gains. So you do have a viable alternative. Just doing a plain vanilla traditional investment account divided out in index funds.

[Co-host]

This is from MP in Connecticut. I'm in the process of paying off debt and I'm researching all ways to cut back on my expenses. My car is a 24 VW and the dealer at Volkswagen recommends an oil change every 10,000 miles. People that have spoken to and resources online recommend still getting the oil change every 5,000 miles. I use my car often and typically drive at least more than 20,000 miles in a year.

[Clark Howard]

Wow. That's a lot of driving.

[Co-host]

A lot. It's a newer car and I've only had it for a little over a year. What are your thoughts?

[Clark Howard]

So go by the owner's manual, not what people are telling you, not what the dealer is saying. Whatever Volkswagen recommends for your vehicle, follow it exactly. If they say in the owner's manual, 5,000 miles, 7,500 miles, 10,000 miles, do that and keep records of it. If there's ever an issue involving a warranty claim you want to show that you've done basic maintenance is recommended on the maintenance schedule. Also in your Volkswagen owner's manual, it's going to tell you exactly what oil they recommend you use for the engine in that vehicle. Maybe a synthetic. May not be. They'll tell you the. The exact oil, like 10W, whatever. And do that. Remember, document. But follow that schedule and that will be just fine. And I want to thank you so much for joining us on today's podcast. Is great to have you here. Those of you watch our YouTube show, our YouTube viewer numbers keep going up, up, up and away. And I love that. And yes, those of you watch on YouTube. This is. All I got is a black shirt and khaki pants. That's what I wear every day of the year. Right.

[Co-host]

Would we call those pants the clarkiform shorts?

[Clark Howard]

Well day because it's.

[Co-host]

Nobody can see today. Nobody can see, though.

[Clark Howard]

Should I show my legs?

[Co-host]

No. You did that once before.

[Clark Howard]

I gross people out.

[Co-host]

Not at all. Not at all. Rated G though.

[Clark Howard]

Yes. So whether you watch or don't show some more skin. Okay. Whether. Whether you watch our YouTube show or you listen to our podcast, you go to clark.com you go to clarkdeals.com you subscribe to our newsletters. You are in a market where you see me on television or hear me on radio, social media, however it is that we connect to you. It's all about empowering you with knowledge so that you can save more, spend less, and avoid getting ripped off. And see you next time.

Get the Angel Reese Special at McDonald's. Now, let's break it down. My favorite barbecue sauce, American cheese, crispy bacon, pickles, onions, and a sesame seed bun, of course. And don't forget the fries and a drink. Sound good?

[Co-host]

I participate in restaurants for a limited time.