The Clark Howard Podcast

Episode: 10.27.25 — The Credit Card Rewards Game / New Tax Brackets & Your 401(k)
Host: Clark Howard
Date: October 27, 2025

Episode Overview

In this episode, Clark Howard takes listeners inside the world of credit card rewards—who the “game” is for, who should steer clear, and how airlines and banks profit from the reward ecosystem. Clark then dives into newly announced tax brackets and shares a strong, clear stance on using Roth versus traditional 401(k) accounts in light of recent changes. Throughout, he fields listener questions on maximizing points, privacy concerns with major issuers, medical billing, payment apps safety, and navigating the 529 education savings plan.

Key Discussion Points & Insights

1. The Credit Card Rewards Game: Who Wins, Who Loses?

• Main Point: Not everyone should chase reward cards; banks target heavy spenders with high credit scores. For most, cashback cards are better.
• Deep-Dive:
  • Airlines (notably Delta) now earn more profit from reward card partnerships than from flying planes (03:00).
    • “Delta airlines makes virtually 100% of its profit not from flying planes…but from the money they get from American Express…” — Clark (03:12)
  • Heavy users (often with 50+ cards) are courted with huge sign-up bonuses, but annual fees can go as high as $900 for American Express Platinum.
  • To make big-fee cards work, you must spend tens of thousands monthly, typically via business expenses.
  • Most people would benefit more from a no-annual-fee 2% cash back card.
    • “Probably 90%…paying these annual fees on these points or mileage based cards would actually more efficiently…have a no annual fee 2% cash back card.” — Clark (08:55)
  • Points devalue—use them before each new devaluation or stick with simple cash back.

Memorable Moment on the Rewards Obsession:

• "It's like you ever been to the dog track and they're chasing the rabbit around the track. The rabbit is for you—'Oh man, I got those points!'" — Clark (05:00)

2. Listener Q&A: Credit Card Decisions & Data Privacy

Southwest Airlines Card Dilemma

• Actionable Advice: Replace high-fee airline cards with no-annual-fee 2% cashback cards; don't worry about losing long credit history as long as you have other long-standing accounts.
• Quote: “Dump the Southwest card after you've replaced it with one of the 2% cash back, no annual fee cards.” — Clark (11:18)
• When canceling, expect retention offers—be 'all ears' but stick to what benefits your finances.

Data Sharing Concerns with Wells Fargo

• Overview: Listeners worry about Wells Fargo collecting and sharing browsing data.
• “Why? I mean, I get capturing information to make sure that…a crook's not doing it, but to share with third parties…that would be really uncool because of the unhappy history that Wells Fargo has had.” — Clark (12:50)
• Clark team commits to investigating specifics and reiterates importance of security over marketing.

Redeeming Cash Back Correctly

• Advice: Always redeem Citi Double Cash as a direct deposit, not a statement credit, to get full 2%.
  • “If you use a credit to pay your bill, you lose the second 1%. Yes. So that is absolutely right.” — Clark (14:26)

3. New Tax Brackets & Your 401(k): Go Roth, Unless You're Exceptionally High Income

• Big News: 2026 tax brackets are out, and Clark is adamant this clarifies Roth vs. Traditional 401(k) for most savers.
  • “It's not pretty clear. It's crystal clear…You want your money all in the Roth version of the retirement plan offered at work, period. No money in the traditional 401k. Period.” — Clark (18:01)
• General Guidance:
  • Single: Under $200K per year? Use Roth.
  • Married: Under $400K per year? Use Roth.
  • Above $500K (single) or $700K (married): Traditional 401(k) may make sense.
• Clark highlights Roth as a way to effectively save ~30% more due to after-tax contributions and future tax-free withdrawals.
  • “If you do this all through your working lifetime, you're able to retire when you want to—way ahead of the clock…” — Clark (20:24)

Memorable Moment:

• “I'm the one person who would actually pay attention to [new tax brackets] and be excited about it because I have screws loose.” — Clark (15:26)

4. Advanced Listener Q&A

529 Plan Rollover Limits

• Listener Concern: What if child doesn’t need the 529 (e.g. full scholarship)? Are rollovers to Roth IRA capped at $35,000?
• Clark’s Breakdown:
  • $35,000 is indeed the max for Roth conversion; excess can go to another child’s education tax-free, but unused, non-qualified withdrawals face ordinary income tax plus 10% penalty—unless the reason is a scholarship (tax, but no penalty).
  • “If your child scholarships out, money…could be transferred to the benefit of another child tax free…But if not, there’s a stick that hits you…with tax and penalties…” — Clark (24:22)

Medical Bills & Balance Billing

• Rule: With in-network providers, you pay only your plan’s share (copay, co-insurance); anything above that is not your responsibility.
• No Surprises Act: Further protects against unexpected bills in emergencies or when you don’t choose the out-of-network provider.

Payment Apps & Bank Safety

• Question: Linking primary and secondary banks—can fraud travel through an external bank transfer link?
• Clark: “Not in any way I’ve ever heard of…” The only real risk is automatic replenishments; always move funds manually.
• Editorial Moment: Clark laments lack of consumer protections in modern payment systems, blaming campaign finance and political access.
  • “[Politicians'] only loyalty is to one direction only, and that’s to who gives the money.” — Clark (29:00)
  • “If I’m some giant mega monster bank…want a meeting…bam…” — Clark (31:09)

Notable Quotes

• “Most people would benefit more from a no-annual-fee 2% cash back card.” — Clark (08:55)
• “Probably 90%…paying these annual fees…would actually more efficiently in their lives have a no annual fee 2% cashback card.” — Clark (08:55)
• "Dump the Southwest card after you've replaced it with one of the 2% cash back, no annual fee cards." — Clark (11:18)
• "If you use a credit to pay your bill, you lose the second 1%. Yes." — Clark (14:26)
• "It's not pretty clear. It's crystal clear… You want your money all in the Roth version of the retirement plan offered at work, period." — Clark (18:01)
• “If your child scholarships out… money could be transferred to another child tax free… Otherwise, taxes and penalties.” — Clark (24:22)
• "[Politicians'] only loyalty is to one direction only, and that’s to who gives the money.” — Clark (29:00)

Timestamps for Major Segments

• 01:10 – 09:30: The Credit Card Rewards Game: Industry, who the game is for, big annual fees, should you play or not?
• 09:29 – 14:26: Listener Q&A: Airline card cancellation, data privacy with credit cards, redeeming points/cash back correctly.
• 17:42 – 22:29: New Tax Brackets, Roth vs. Traditional 401(k) Decision Matrix.
• 22:35 – 30:28: Advanced listener Q&A: 529 plan rollovers, medical bills and "balance billing," bank safety with payment apps; Clark’s commentary on the political ecosystem.
• 31:09 – 32:37: Clark’s reflection on political access and closing thoughts on empowerment.

Final Takeaways

• Credit card rewards can be lucrative for heavy spenders with discipline, but most people are better off with a simple 2% cash back card with no annual fee.
• Periodically review your reward cards; don’t hang on to those with high annual fees unless you’re truly maximizing them.
• Roth 401(k)s are almost always the superior choice for those under $200K (single) or $400K (married) in annual income—new tax brackets reinforce this.
• Always redeem credit card cash back in ways that give you the full benefit (e.g. direct deposit, not statement credit with Citi Double Cash).
• Protect your privacy and finances by managing banking links deliberately and advocating for stronger consumer protection.
• For 529 plans, $35K is the max Roth rollover; educate yourself about alternative options if your child won’t use all the funds.

Clark’s sign-off wisdom: Always equip yourself with knowledge to avoid life’s financial landmines: “Save more, spend less, and don’t ever let anybody rip you off.”