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The Clark Howard Podcast
06.09.25 Vanguard’s New Cash Management Account / Debt Collections
00:31:55
Vanguard’s New Cash Management Account / Debt Collections
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- [00:00]
Clark Howard
At Capella University, you can learn at your own pace with our Flexpath Learning format. Take one or two courses at a time and complete as many as you can in a 12 week billing session. With Flexpath, you can finish the Bachelor's degree you started in 19 months and under $19,000. A different future is closer than you think with Capella University. Learn more at capella.edu fast as 25% of students. Cost varies by pace, transfer credits and other factors. Fees apply. The new McCrispies trip is dip approved by Ketchup Tangy Barbecue Honey Mustard, honey mustard Sprite, McFlurry Big Mac Sauce, Double Dipped in Buffalo and Ranch More Ranch and creamy chili McCrispy strip dip now at McDonald's it's great to have you here on 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 I want to remind you, our Team Clark Consumer Action center is here to serve you with free advice. One on one free advice, something we've been doing since 1993. So you can find out how to get that free one on one advice how it works when available at clark.com/cac in today's episode, I want to talk about a new way for you to store your cash. Something that Vanguard used to do that they're now doing again. And those of you that have Vanguard accounts need to be aware of this because it's really going to be useful for you. And then question I get all the time about debt collectors. What rights do you have? Is unfortunately, more and more people are facing being delinquent on debts. What happens when that collector calls? What are you allowed to tell them to do or not do? We'll discuss that later. Now let's talk about the other side of the ledger, having money. Vanguard has launched the Vanguard Cash plus account. It works kind of like a quasi savings account or checking account and it allows you to deposit money into it electronically. Unlimited transactions. Direct deposit of your paycheck you can pay bills from is not called a checking account. It is not quite that, but it is a cash management account with no fees that pays so much more than having a traditional checking account with a bank. Right now, the account with no fees pays 3.65%. So not the highest amount out there on just a simple savings account, but it's a great alternative for the equivalent of what I would think of as a semi checking account. And so the Cash plus account can't do everything for everybody but it can do most things for for most people who have a Vanguard account. And it can be linked directly to if you still have a legacy bank account somewhere. I have no bank account anywhere. But if you do have a legacy bank account somewhere, it can link and they move money back and forth for you for free as you command them to. So you can use it since you can pay bills through it. It'll even work with if you use Venmo or something like that. You can use the Vanguard account, the Cash plus account for that. It also comes with FDIC insurance coverage. So you have quarter million dollars coverage in an account that's paying you think how often banks pay you zip on your checking account, even if you got big money in it and still try to come up with some way to charge you a fee. This is the real deal. If you're already in the Vanguard system. And now it's time for questions.
- [04:47]
Co-host
All right, this first one is from Mario in North Carolina. With interest rates allegedly not falling anytime soon, is there a benefit of paying down interest rates versus putting more money down up front? I'm looking for pros versus cons on ways to lessen the monthly payment when buying a house.
- [05:04]
Clark Howard
Okay, so mortgage rates have stayed stubbornly high and originally it was because of inflation. Inflation is getting more under control now. The signals that the mortgage market is taking are based on the size of the federal budget deficit. So there's worries that the budget deficit, instead of shrinking, is going to continue to grow. Why does that affect mortgage rates and indirectly other interest rates as well? Because the interest that people can earn on long term Treasuries and mortgages so directly are affected by the 10 year Treasury. The 10 year treasury rates rise as people get worried about the size. Investors get worried about the size of the federal deficit and the amount of debt we have to service as a country. So when those rates rise, the rates that you have to pay on a mortgage go up. If the Congress and the President gets serious about federal spending and the deficits we're producing, that will have a direct impact on what happens with mortgage rates. Mortgage rates have come down a little with the economy slowing some. But real movement in mortgage rates is going to require two things, lower inflation and federal spending. That's not out of control.
- [06:43]
Co-host
Fred in Minnesota says we are traveling to Houston, Texas from Minnesota to pick up my father in law and move his stuff to assisted living in Minnesota. On our last trip up, we were sent a bill by mail for the tollway. I hear it's cheaper if I Have some sort of tag. What do you suggest for a one time visit?
- [07:02]
Clark Howard
For a one time visit. There's really not a great alternative. Then pay by tag or pay by plate as it's called. They call it different things in different states where they just take your license tag or plate and bill you at a higher rate than if you had some kind of toll reader. And if you're almost never going on a car trip to Minnesota, it's not worth it. Now there's a multi state toll pass that you can get that I have because I travel so much. That is one that's sold by a toll authority in Florida and it's a portable pass known as the uni and it works so far in 18 states with toll roads. And you're in Texas, right?
- [07:52]
Co-host
He's in Minnesota and going to Texas.
- [07:54]
Clark Howard
Oh, I thought it was the other way around.
- [07:56]
Co-host
Going to Houston to pick up father in law and bring him back to Minnesota.
- [07:59]
Clark Howard
Back to Minnesota. Okay. So the Minnesota Uni works in a bunch of states across the eastern seaboard, but nobody has yet a pass that works in all the states that have tolls. So for people who travel in Minnesota and In the other 17 states covered by the uni, it's great because you buy this thing on Amazon for about, I think I paid 10 or 15 bucks for it. And then you post money in the account and then as you go through tolls, you're paying a preferential price to being billed later. For me, I use it because rental car companies rip you off billing you for going through tolls, charging huge fees to do that. And I avoid those by having the Uni pass the unique pass. But I don't have an easy answer for you in your situation. And I hope that the journey of your father in law as he goes into assisted living is a good one at the facility you have for him in Minnesota.
- [09:12]
Co-host
Nikki says, I have a 25 year old daughter that needs individual car insurance. She has a Toyota Corolla 2017 Sport. In the past she's been in two car accidents.
- [09:22]
Clark Howard
Hope she was okay from each of those.
- [09:24]
Co-host
One of them will fall off next year. Which car insurance companies would you recommend she look into? Thanks for all you do. You've been saving me so much money.
- [09:32]
Clark Howard
I'm appreciative for your 25 year old. That's a key number with car insurance because insurers expect people to have accidents from age, whatever the driving age is in each state, 16, 17 or 18 up to age 24. The stats show clearly a much higher Rate of accidents that also statistically declined significantly by the time somebody turns 25. So 25 is an age where you can get significantly more affordable car insurance. Having had two accidents in the past, that's not good in terms of how the insurance underwriters, which now is pretty much an automated system are going to treat her. So Nikki, what I want your daughter to do is find what's known as an independent agent. They are much more rare breed than they used to be. But independent agents are experts at figuring out what insurer is best for a particular driver's profile. And if you Google independent agents there actually there's a trade association we've given before for independent agents. It's independent agent.com and when you go there they have a map of the United States. You click on the map and it'll take you to where in most states you can see a clear list of independent agents available near your daughter that will help her shop for the best deal for auto insurance with her prior spotty record of the two accidents. As you so well pointed out, those don't haunt you forever for a period of time depending on the state and the insurer, how long prior accidents or claims come back to bother you in terms of what you have to pay per month. And I'll tell you, the independent agents understand the market backwards and forwards. Coming up ahead, I want to talk about somebody you don't want to talk to and that's the debt collector calling to hassle you about a debt you have. I want to talk about your rights.
- [11:55]
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- [12:14]
Co-host
It so much last time that we decided to play another Clark minute. And here it is.
- [12:19]
Clark Howard
This is Clark Howard. If you've had a number of jobs over the years, you may have money that's gone missing from you from those jobs. What do I mean? Well, based on what I've read and talking to people, a lot of folks had a 401k or something equivalent where they used to work and kind of forgot about it. And that money's floating out in outer space and it's your money and you don't want it to get away from you. Well now there are ways you can go out and search for money from an old job and reclaim it and bringing it back into your assets. All you gotta do is@clark.com click on our story or search for our story. How to find missing or lost retirement accounts and it's easier than you might think to be reunited with your money.
- [13:16]
Don McDonald
Did you know the term financial advisor is utterly meaningless? Anyone can pretend to be one, including commissioned stockbrokers and insurance agents. Are you aware that even professionals trying to beat the market by picking stocks or timing have been shown on average to return less over time than index funds? Are you looking for a podcast that will give you sane, simple, consumer centric advice about managing your Money? I'm Don McDonald and my co host Tom and I invite you to listen to Talking Real Money on this and every podcast service. We promise to tell you the hard truths about money and investing because the truth will set you free to build a better future. We advocate for investors, not the financial industry. Plus we think you'll be entertained in the process. Make Talking Real Money your source of fiscal truth. When you're finished with this podcast, just search for Talking Real Money. You have almost nothing to lose and a secure financial future to possibly gain. Visit talkingrealmoney.com or search for Talking Real Money.
- [14:16]
Advertiser
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- [14:40]
Clark Howard
More@Applecard.Com the number of people who are delinquent right now on debts has been going up. Car loans very heavily in delinquency. Credit cards heavily in delinquency. And it really is a sign of the income split in the United States where we've got people at the higher end of the income ladder who are doing actually really well right now. When you look at sales of high end goods, they're doing fine. And then people with everyday incomes are really stretched and struggling in many cases to make ends meet. And that's when they get to meet the bill collector, the debt collector. So I want you to know that in a cycle like this, companies are getting more aggressive about turning debts over to debt collectors. And the things I'm going to talk about don't apply if it's an actual employee of the company you owe money to calling you. But most of the time it's going to be a debt collector. So a debt collector will call you about a debt. You can talk to them if you want. You don't have to talk to them if you don't want. And you know debt collectors will call again and again and again. But do you know you have the right to tell them never to contact you again. And they're prohibited from that point forward of contacting you. Doesn't mean they can't sue you against a debt or potentially put it on your credit report. But we're going to come to that in a second. You don't have to put up with harassing phone calls, period. Second. And you got to do that in writing. By the way, we have a drop dead letter on clark.com that you can send to a debt collector. Tells you what you say so they don't hassle you. But here's the bigger thing. A lot of times you're being contacted about a debt that's not yours or a debt that you don't owe, or an amount that's wrong, too high. Within five days of an initial contact by a debt collector. By law, they don't all comply. They have to send you a letter about the debt. You can contest that letter if it's wrong and there's a clear procedure that stated in that letter, you have to follow for it to be properly recorded that you're challenging the validity of the debt. You'd be amazed how often people are contacted about a debt they don't know. And if you don't say anything, the lie becomes the truth in 30 days. It's considered to be a valid debt at that point, even if it's not. That's why you don't sit on your rights. That's why you just don't call them about it. You have to follow the procedure about that debt. What happens if you actually do owe it? So then you want to negotiate. If you have the money, what's the power you have in the negotiation? The fact that you have the money and what do you not want to have happen? You don't want it to be on your credit report. So even though collectors say it doesn't happen, let me tell you, it happens all the time. You negotiate with the debt collector that you want that debt removed in return for payment of the money. And the way you do that is you say, I'm disputing that this debt's a valid debt. But to settle this matter, I'll pay you. I need in writing from you that this Will not be on my credit report in return for payment of the money. Once you paid the money, you have no power with that. Very important. Let's say you don't have the money, but you know you owe it. You want to negotiate a payment plan or a reduction in the amount you owe, what's known as a settlement. But whatever you agree to in a payment plan or a settlement, you need to honor your part. Now with a settlement or a payment plan, you're getting a theme here. It's got to be in writing. The big mistake you can make is paying a debt collector on their verbal promise of this, that, or the other. Then later turned out they lied to you. You never ever, not ever pay a penny to a debt collector under any agreement until you have that agreement in writing. And because of the sector of debt collectors, most debt collectors are doing a hard job, honestly. Unfortunately, there are a lot of sleaze balls in the business. In addition to all the very honest people doing a hard job, There are the sleazy ones. You don't give them the routing numbers from your check, from your checking account. Because what happens with a sleazy collector is they'll take money and keep on helping themselves to the money, maybe even beyond what you ever owed. If you need to, you pay them by money order. There's no traceable document there. There's nothing. They can come back and hit up for more money than what was agreed. Got to be so careful with debt collectors because again, the ones that are dishonest create problems for everybody. And remember this, you don't pay a debt you don't owe. Collectors work from many times very incomplete information, and they'll contact the wrong Clark Howard or the wrong, well, your last name, the wrong you. But if you have anything that's anything common at all, they could be contacting the wrong person demanding payment from you for a debt you don't owe. Don't let them intimidate you into paying money. That's not your responsibility, not your debt.
- [20:50]
Co-host
All right, here are some questions for you, Clark. This one came in from Dallin in Australia. My mother had purchased life insurance on all her children and their spouses. My daughter and I have recently lost my wife. Sorry.
- [21:04]
Clark Howard
Oh, I'm so sorry.
- [21:06]
Co-host
I'm in my 30s and my daughter is three. My mother wants to give us the money she got about $180,000. I would love to invest enough for my daughter, for her future and some into mine, but leave enough to make an additional monthly income. The first question is, what would be the best way for my mother to give us the money. So I understand there's a certain amount she can gift before getting taxed on it. Second question. How much should go towards an investment account for my daughter to jumpstart her future? Thank you for all the help you provide to all of us every day.
- [21:40]
Clark Howard
Gosh, I mean, the circumstance you describe is absolutely crushing. I feel so badly for you and your 3 year old daughter as a parent and as a husband. I mean, just how brutal. And I wish both of you the best as you recover from the pain that you both would feel. As far as money, this is a case where the amount of money is so large you need to talk with a lawyer who specializes is a more expensive lawyer. But you're not going to need that many billable hours. You got enough money here. I want you to sit down with a lawyer who does wills, estates and trusts. Find out the most effective way for your mom to gift this money with the purposes you intend for yourself and for your daughter. The reason is you mentioned the tax implications, but also the complexity involved with money going to the benefit of a three year old. It's going to be a long way away from where the money could be properly handled by a child who's that young. So in terms of your original question, your mom can give can gift 19,000 a year, no sweat to each of you. No tax implications really to speak of at all. She'd be able to move all the money in roughly five years, completely out of her name into both of yours without any tax issues at all. But the tax issues aren't alone enough to worry about because of the situation and how you. How you want to think through how the money's distributed to each of you. And that's why I really think it's well worth an hour or two clock time with a lawyer who. Not any lawyer, D. It's a lawyer who specializes in Will's estates and trusts.
- [23:43]
Co-host
Maybe a fiduciary too.
- [23:45]
Clark Howard
You mean in terms of financial planning?
- [23:47]
Co-host
Right? Like maybe it should go into 529, like a certain amount of it and things like that that could be turned into a Roth if she doesn't go to college.
- [23:54]
Clark Howard
Yeah. So D, if you're a longtime listener, you're aware of what Chris is talking about. A fiduciary. That's where you talk with a fiduciary financial planner who can work with the lawyer to make sure this is done. The most efficient way for the transfer of assets and in addition, that the money is properly and well invested for particularly the money for your 3 year old. And best to both of you.
- [24:24]
Co-host
Okay, this one's from Michelle in Oregon. My 27 year old son has been teaching English in South Korea for two years. He has saved over US$20,000 equivalent in his South Korean bank account. What is the best way for him to move this money to his US accounts where he can invest it and or put it in a high yield savings account to earn some money? He and his older brother were subjected to listening to you in the car when they were younger. Both are now very good savers.
- [24:51]
Clark Howard
Well, first of all, that child abuse making your 27 year old listen to me when they were a small child. But I'm glad that you give me some credit. But really the credit goes to you that both of your kids are great savers. Moving money from South Korea to the United States is not for the faint of heart. The South Korean won is not easily moved into a US dollar account. Traditional banks will charge massive fees, gigantic fees for moving money from South Korea to the United States. There's a lot of money exchange that goes the other way. People of South Korean descent who live in the United States, who send money back to family, to relatives in South Korea, a lot of organizations help with that. There are fewer that go the other way from South Korea to the United States. One that I think does a good job with. It is wise. I also know from people who have worked as English language instructors in South Korea in the past that there are South Korean owned and based money transfer companies that can move money at low cost from South Korea to a US account, converting the wine to the dollar at very favorable rates. If you go and you look on exchange sites, you'll be blown away at the difference. The equivalent of US$20,000 in one, which would be, I think a bunch of millions of dollars of one. The difference in how much money your son would net out from one money exchange service to another. It's shocking how much money some of the money transfer options will cost in real hard earned money that your son has saved so well. You don't want him to get ripped off. And that's why start with wise as a baseline and then look at South Korean based transfer services. Okay.
- [27:08]
Co-host
Brad in Illinois says, my wife and I are fortunate and worked hard to earn a high combined income. We both max out Roth 401k contributions as well as backdoor Roths. I don't quite understand Clark's advice for not making Roth contributions above a certain income level. Can the man from Roth. Explain why he has an income cap on the Roth.
- [27:26]
Clark Howard
Okay, this is a great question. Okay, so if you're making as a couple, you're earning more than trying to remember the current dollar amount. I think it's about 600,000. You're in such a high income tax bracket that doing a traditional IRA would potentially be preferable to doing a Roth. However, if you're looking at doing 7K into a backdoor Roth, what that is is a non deductible ira. You weren't eligible for a traditional ira. You weren't eligible for a Roth. Income wise, then doing the backdoor Roth, which allows you to put the money in and then immediately get around the income cap by putting the money in a Roth even at high income. That's a good idea. Krista kindly brought up the income tax brackets and if you're earning more than 500,000 a year, that's the tipping point where like a traditional 401k versus a Roth 401k traditional IRA versus a Roth IRA can become a better idea because you're already at such an extremely high tax rate and you have better odds that in retirement you as a couple will be in lower tax brackets than you are right now earning an income above 500,000. You don't say what the high combined income is. Very, very thin sliver of the American people earn above 500,000 and they're the exceptions to following the advice of the man from Roth and would benefit from doing traditional 401ks traditional IRAs. You know who else might? There's one exception to all my rules about this and that someone in an income based repayment plan for student loans benefits from doing a traditional. So you're put into a lower payment plan on student loans. There may be some other reason I can't think of it right now, but thank you so much for joining us today on the podcast. I hope you have an absolutely wonderful rest of your day. Know that we're going to be back at your service on Wednesday giving you ideas to save more, spend less and avoid getting ripped off.