12.24.24 BEST OF: Retail Membership Considerations / Timeshare Scams Get Worse

Summary

The Clark Howard Podcast – Episode 12.24.24 Summary

Title: BEST OF: Retail Membership Considerations / Timeshare Scams Get Worse
Host: Clark Howard
Release Date: December 24, 2024

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Clark Howard delivers a compelling “Best Of” edition of his podcast, focusing on the evolving landscape of retail memberships and the alarming rise of timeshare scams orchestrated by organized criminal groups. Additionally, he addresses several listener questions, providing expert financial advice and practical tips.

1. Retail Membership Considerations

Clark opens the episode by examining the surge in retail membership programs, highlighting how both major and smaller retailers are increasingly adopting subscription models to boost sales and customer loyalty.

Key Points:

• Emergence of Retail Memberships: Retailers like Target are now introducing membership programs to compete with giants like Amazon and Walmart. Clark notes, “Target is a Johnny come lately to the membership thing” ([02:10]).
• Impact on Spending: Memberships often lead customers to spend more within the store. For instance, Walmart Plus has significantly increased Walmart’s sales by attracting higher-income shoppers and encouraging purchases of higher-margin items ([03:05]).
• Comparison with Amazon Prime: While Amazon Prime membership growth has plateaued, Walmart is rapidly expanding its membership base. Clark observes, “Half the American people almost are members of the Amazon Prime membership program” ([04:20]).
• Value Assessment: Clark urges listeners to evaluate whether their memberships are truly beneficial. He shares his personal experience, stating, “In my experience quite a bit cheaper with Walmart day in and day out than they are with Amazon” ([05:45]).

Notable Quote:

“When people join one of these programs, they end up spending a meaningful amount more money with that retailer.” – Clark Howard ([03:15]).

2. Timeshare Scams Get Worse

Transitioning to a more serious topic, Clark warns about the increasing sophistication of timeshare scams perpetrated by Mexican-based drug cartels. These criminal organizations are exploiting timeshare ownership to execute large-scale financial fraud.

Key Points:

• Cartel Operations: According to Clark, major drug cartels now run multiple call centers dedicated to scamming timeshare owners by offering to buy their timeshares for inflated prices ([16:04]).
• Mechanism of the Scam: Scammers deceive victims into providing their bank account details under the guise of facilitating a sale, subsequently draining their accounts ([17:30]).
• Market Realities: Clark emphasizes that timeshares typically hold negative value, making genuine buyers rare. “Anybody who would take it off your hands, as a general rule, you're going to have to pay them to take it from you” ([18:55]).
• Advice for Owners: For those looking to exit their timeshares, Clark recommends resources like Timeshare Users Group and his own guide at Clark.com, stressing the importance of understanding that selling a timeshare often incurs costs rather than providing financial gain ([21:15]).

Notable Quote:

“Most timeshares have a negative value. Even if you paid 10, 15, 20,000 to buy that timeshare, it is an obligation, not an asset.” – Clark Howard ([17:50]).

3. Listener Questions and Financial Advice

Clark dedicates a significant portion of the episode to addressing listener inquiries, offering practical solutions and financial insights.

a. Student Loan Repayment for Parent PLUS Loans

Listener: Joan in New York
Question: How to find a professional to manage Parent PLUS loan repayments.

Clark’s Advice:

• Self-Education: Clark encourages becoming well-versed in repayment options, pointing Joan to the U.S. Department of Education’s website for accurate information on Income-Driven Repayment (IDR) plans for Parent PLUS loans ([07:43]).
• Understanding IDR: He explains the benefits of IDR plans, which can significantly reduce monthly payments and potentially forgive the remaining debt after 25 years ([08:02]).

Notable Quote:

“You become your own expert.” – Clark Howard ([08:00]).

b. Credit Card Debt in Collections

Listener: Jody in Florida
Question: Is it beneficial to pay a reduced settlement on a credit card in collections, and are there tax implications?

Clark’s Advice:

• Negotiation Strategy: Clark confirms that negotiating a reduced settlement is common and can significantly lower the debt owed ([11:05]).
• Tax Implications: He warns that forgiven debt might be considered taxable income, leading to potential tax liabilities. For example, if $800 of a $1,000 debt is forgiven, the taxpayer may owe taxes on the $800 ([11:16]).

Notable Quote:

“You will pay tax on the $800.” – Clark Howard ([11:16]).

c. Financial Independence for Dual-Income No Kids (DINK) Couples

Listener: Nancy in Florida
Question: Clarification on the term “DINK” and its implications for financial independence.

Clark’s Response:

• Term Clarification: “DINK” stands for dual income, no kids. Clark appreciates the term “Thinker” for those pursuing high incomes, no kids, and early retirement ([12:45]).
• Financial Strategies: He acknowledges that while having no children can simplify financial planning, individuals with children can also achieve significant savings and financial independence with disciplined strategies ([13:00]).

Notable Quote:

“Even if you have kids, and we've had the posts from people who have children who have still managed to save crazy amounts of money and have financial independence way before normal retirement age.” – Clark Howard ([13:00]).

d. Travel Planning and Booking Strategies

Listener: BO in Florida
Question: Can you book a stopover with an airline to break up a long flight to Hawaii without separate itineraries?

Clark’s Advice:

• Separate Itineraries: Clark advises booking two separate tickets rather than trying to create a stopover within a single itinerary. This approach can save money and provide flexibility ([22:28]).
• Optimal Stop Locations: He recommends choosing stopovers on the West Coast rather than places like Houston to take advantage of cheaper fares and better deals ([22:28]).

Notable Quote:

“The combination of the two is going to be much cheaper than your fare from Jacksonville all the way to Honolulu as one ticket.” – Clark Howard ([22:28]).

Listener: Andrew (Unspecified State)
Question: Is there a tool like Kayak Explorer for hotels that provides alerts for great deals regardless of location and dates?

Clark’s Response:

• Market Limitations: Clark explains that such a tool doesn’t exist due to the fragmented nature of the hotel market ([24:36]).
• Manual Searching Tips: He suggests focusing on outer-ring hotels in metro areas to find better rates and leveraging the calendar to identify low-price periods ([24:00]).

Notable Quote:

“Maybe, Andrew, that's your opportunity in the marketplace.” – Clark Howard ([24:36]).

4. Conclusion

Clark wraps up the episode by reiterating the importance of saving more, spending less, and avoiding financial pitfalls. He emphasizes proactive financial management and urges listeners to stay informed and vigilant against scams, particularly in high-risk areas like timeshares.

Final Thought:

“It all starts with you from every dollar you make, putting aside a decent amount of it up front so that then you live on the rest.” – Clark Howard ([24:36]).

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Resources Mentioned:

• Team Clark Consumer Action Center: clark.com/cac
• Timeshare Users Group: Timeshare Users Group
• Clark’s Timeshare Guide: Clark.com/timeshare

Join the Conversation: Submit your questions at www.clark.com/askclark

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This episode offers valuable insights into navigating the complexities of modern retail memberships and safeguarding against sophisticated financial scams. Clark Howard’s practical advice empowers listeners to make informed decisions and maintain financial well-being.

Transcript

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[Clark Howard]

Hope you're having a great holiday week. I am off on adventures so this is a best of edition of the Clark Howard Podcast. I hope you enjoy it and that you have an enjoyable holiday week. 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. And you know I can't get to all the questions posted, but there may be a question that you got to have an answer to. And we got the place for you. It's our Team Clark Consumer Action center that's been serving you for free since 1993. Answering your questions one on one. If you go to clark.com cac you'll see the hours and how to reach our team of eager beaver volunteers and paid staff that are there to help you with the questions you have. And I want to talk today about the subscription obsession that has now taken grip of retailers and what you need to know about playing the subscription game. And also if timeshares weren't already enough of a problem for people, now organized criminal gangs are getting into scamming people with their timeshares. Wait till you hear what's going on. So Target is a Johnny come lately to the membership thing. But it's not just the big retailers, it's smaller retail chains as well are trying to sell you memberships. Target obviously has been losing market share to Amazon and to Walmart. Walmart has been growing its membership base at a really rapid clip. Amazon is kind of frustrated because their memberships have stalled out, which I don't think is that bad because they have half the American people almost are members of the Amazon prime membership program. And Walmart is growing from a much smaller base, Target starting at a big fat zero. Then of course you have the warehouse clubs, which in my book are a different kind of idea with a membership fee. But there are people who get upset with me about touting the membership based clubs. Costco, Sam's and the regional BJ's Wholesale Club. But now retailers of various shapes and sizes are coming up with their own membership programs. What's it all about? When people join one of these programs, they end up spending a meaningful amount more money with that retailer. Walmart has been reporting very large gains in sales year over year since they started Walmart Plus. In Walmart's case, what happened is they attracted a lot of people who never shopped in Walmart who were generally higher income, had more disposable income and bought things that were higher profit margin items for Walmart. That made it all work for Walmart doing the delivery. And that's where Walmart took market share from Target, that it always had a focus on higher income shoppers than Walmart. And Walmart encroached on that so much. This is a defensive move from Target. Thing is, you pay all these memberships, are they actually working for you? You know, there's been this backlash on Amazon which is why their memberships have stalled out. People are saying, okay, well I'll just do the minimum order to get free shipping, which is often $35 on Amazon and not pay them the $139 a year. The difference that Walmart and Target are bringing to the table is both of them have designed their programs to be quicker delivery than what Amazon usually offers and the delivery in most cases is free. And they're getting more and more sophisticated at delivery. So it gives them the physical stores and gives them the delivery ability. I will tell you, as a longtime member of Walmart plus and also in our household, longtime Amazon prime members, that the Amazon delivery is more reliable than the Walmart delivery. You never know. When you order from Walmart.com is the item going to come in an hour or is it going to come in five or six days? There's not the consistency that you have with Amazon with the two day delivery. But without doubt the prices are in my experience quite a bit cheaper with Walmart day in and day out than they are with Amazon, with Amazon's own merchandise, not the Amazon marketplace, but with Amazon's own merchandise versus Walmart's own merchandise. And so think about in your own life with subscriptions, memberships you sign up for, are you making them work for you? Let's go to my favorite retailer, Costco. If you're not going to the Costco, you're wasting your money with the membership. The same time Sam's Club, their premium membership is superior to Costco's premium membership because the Sam's Club premium membership comes with delivery on most items for free or better deals when you shop in person than you have with the regular Sam's Club membership. So if you like Sam's Club and you're only going to join one club or the other and you shop a lot in warehouse clubs, you're going to find the Sam's Club membership a superior choice to the Costco membership. There, I said it. Our dog is named Kirkland Signature after Costco's private label. But I gotta call them as I see them.

[Listener]

There you go. All right. Joan in New York has a question.

[Clark Howard]

Yeah.

[Listener]

With all the changes in regards to student loan repayment and forgiveness, I feel like I need an expert to help me make the right decisions when repaying my parent plus loans from my two children. How do I go about finding a reputable professional in this field? I have a tax accountant, but I don't think he's particularly knowledgeable in this specific area.

[Clark Howard]

You become your own expert. So let me tell you what's going on. The Parent plus loans were not made part of the very generous forgiveness programs that were made available for a lot of other federal student loans. But there is a loophole open just till next year, just till 25 on the parent plus loans that right now is scheduled to terminate July of next year. So the way it works is there's something for parent plus loans called idr, Income Driven Repayment plans. There are all these initials with these student loans and it gives you a favorable formula for paying on them and then allows you eventually to have the loans forgiven without calling it forgiveness. So what I want you to do, you're not going to find people out and about that are knowledgeable on it. Go to the U. S. Department of education website, ed.gov and look for the ICR plan. Income, income driven. Why is it called ICR? It's income driven repayment. Should be IDR. Right? Anyway, go there and read the rules on it for parent plus loan holders and you'll see how you have to go through this conversion process with your loans. Then you go on the income driven repayment plan and then you will have the payments you're required to make reduced and there will be a cap on number of years you have to pay. So it will be at first confusing and then pretty clear. So it's income contingent repayment repayment plan, an income driven repayment plan. So it will come up with a fixed monthly payment for you on the parent plus loans for the next 12 years. And then in total, the number of years you have to pay is 25 years for the remainder to be forgiven. But the reason that doesn't sound as bad as it is is that the payments that you're required to make based on your income are usually much lower than what the payments normally would be on a Parent plus loan. So it's not like plain and simple like you could have in a student loan, but it will get you a reduction in the total indebtedness you ultimately face for those Parent plus loans for your two kids.

[Listener]

Jody in Florida asks, is it beneficial to pay a reduced settlement on a credit card that's in collections? Are there any tax implications so beneficial?

[Clark Howard]

It is common that people negotiate when a credit card debt has gone into charge off that people will be able to successfully negotiate a reduced amount. Because usually when somebody defaults on credit card debt, the bank involved and or the collectors get little or nothing. When you're willing to make a deal to pay a meaningful chunk of money, they'll often say okay, but you want that okay in writing and you want to keep that written proof for as long as you live. Because it seems the banks and their collectors get amnesia about these deals. Now here's the bad part. Let's say just for argument's sake, I'm keeping the numbers simple and round. You owe a thousand dollars, you reach a deal to pay 200 and that represents payment in full. So you'll pay the 200. Remember, it's got to be in writing. Then you're likely going to get a 1099 from the bank involved for the $800 they forgave. So based on your tax rate, you don't walk away from the full 800, but you will pay tax on the 800. So whatever your tax rate is, you will owe some amount of additional tax. It's still going to be substantially less money than what you owed on the credit card debt.

[Listener]

Nancy in Florida says, I just heard you use the term dink on your show and would like to offer another I prefer thinker 2 high incomes, no kids, early retirement. Keep up the excellent work. Well, so Dink is dual income.

[Clark Howard]

Dual income, no kids. Yeah. So even if you have kids, and we've had the posts from people who have children who have still managed to save crazy amounts of money and have financial independence way before normal retirement age. But yes, it is easier for people who are dual income, no kids. And I like your thinker, is a way of taking control, saving a maximum amount of money, creating that freedom to do whatever you want to do, often in middle age instead of much later in life. And that's absolutely wonderful. Now, coming up, we're going to talk about something that's not wonderful at all. The way people get trapped and timeshares and then in the trap get scammed. You're not going to believe who's scamming people now.

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[Clark Howard]

About what I'm about to share with you last year, I was like, nah, nah, this isn't really happening. But apparently this is a real thing. Mexican based drug cartels have decided they can make more money scamming timeshare owners than they can make selling drugs. This is absolutely stunning. US Officials have told media outlets that one of the largest drug cartels in the world now operates multiple call centers where they rip off people who are in timeshares. And they just do calling all day long, offering to buy timeshares that people have been trying to get rid of. They may see them on message boards, they may just be working from lists, but they contact you and say, yeah, we're going to buy your timeshare for X number of dollars. And one of the common ways they take you is they say, and we're going to deposit the money in your account and they'll get from you your bank account, account number and routing numbers for your bank. And do you know what happens when somebody has the routing number for a bank and then your account number? The banking industry has no security on that. Anybody can come in who knows how to do it with those numbers and they can empty your account. And that's what the drug cartel is doing over and over and over again. Is according to the New York Times, one of the cartel outfits has stolen hundreds of millions of dollars from unsuspecting timeshare owners just by doing this, by going in, telling you a tall tale that they've got the buyer for your timeshare, they're going to buy it and all they need is your account number to transfer your money in for your thing and instead they steal all the money. Also, the New York Times said an angle I had not heard of, the cartel is bribing employees at timeshare operations to give them the contact information for people who own those timeshares and then work those hot lists of contacts and then con people, they're stealing money so efficiently every day. You just gotta know, you just gotta know that nobody is sitting out there with the timeshare. You don't want to have saying, oh man, we've got the buyers and they're gonna pay you top dollar for your timeshare. The reality is, most timeshares have a negative value. Negative value. Even if you paid 10, 15, 20,000 to buy that timeshare, it is an obligation, not an asset. And so anybody who would take it off your hands, as a general rule, you're going to have to pay them to take it from you. You're not going to get paid to sell it.

[Listener]

So I have a question from someone about this. Teresa in Florida says, I'm looking for a reputable way to get out of my timeshare. It's fully paid for. I'm just paying the maintenance fees.

[Clark Howard]

Please help, Teresa. I mean, what you said is why the timeshare market is a defective market. Because for every one buyer, there's thousands of sellers. It is a faulty market because the timeshare that you have has no intrinsic value. Because think about the cost of it. You know, you live in Florida. You got the condos all around you. So somebody goes to buy a condo, they buy that unit one time, there's one owner. On the other hand, if there's a timeshare development, each unit has to be sold 50 times or 51, depending on whether there's one maintenance week, a year or two, the cost of marketing and selling and commissions of selling one unit 50 times over, by the time that's done, it has a negative value in the marketplace. And that's why once you bought that timeshare, you paid the money you paid to buy it is for the marketing, sales and commissions. There's no value of that week. So that's why it's so hard to sell. Go on the website Timeshare Users Group, and we have a [e-mail] that lists their web address and other potential ideas to unload your timeshare. But just know you're not going to get any money for it. You may have to pay money to properly and legally get somebody to take over that week.

[Listener]

And that article [e-mail] timeshare and we've got how to sell it, if you can, how to cancel it, give your timeshare back, list your timeshare for a dollar, give it away, or donate your timeshare to charity. Sounds like a great deal. It is.

[Clark Howard]

It is a hard thing, Teresa. And if somebody ever is intrigued to buy a timeshare from a pitch at a place and you think it would be great to have it, no, you shouldn't have to pay for it, that you should get paid to take it. So you find somebody who bought it, paid the big money, doesn't want it anymore. And if you can make that timeshare work for you? If you don't have to pay for it, go for it. Otherwise, stay away.

[Listener]

BO in Florida says we have booked an eight day stay at a resort on Oahu in early summer and are flying from Jacksonville to Honolulu. There are no nonstop flights and we are looking at roughly 13 hour flight with our three kids, two teens and one preteen. I hate flying and thought it might make it a little easier if we break up the flight by spending the night in Houston, going to an Astros baseball game and then continuing on to Hawaii the next day. Is there a way to book a stop with the airline so I don't have to book two separate itineraries?

[Clark Howard]

Actually, you do want to book two separate itineraries, Bo, and you want your stopover not to be in Houston. Even if you love the Astros, you don't want it there. You want it on the West Coast, Louisiana, San Francisco, San Diego, whatever. The reason is the price competition to the Hawaiian Islands from the west coast is intense and the fares lately have been as cheap as 178 round trip from west coast departure points to the Hawaiian Islands. I mean, just crazy cheap fares from Jacksonville to the West Coast. Very. But they're the combination of the two is going to be much cheaper than your fare from Jacksonville all the way to Honolulu as one ticket. So the two ticket thing is actually a big money saver. Go the west coast, take your kids to something in California. Maybe you go to Disneyland. I don't know what you'd want to do since you have Disney World 2 hours from you in Jacksonville. Dodgers, the Seattle Mariners, the Angels, the Los Angeles Angels. I mean there's a lot of stuff you can do. You can go see the Hollywood Walk of Fame, you can do whatever you want to do and look at buying those two tickets separately because it's going to allow you the break in the long flight and save you money.

[Listener]

Okay, this came into the Clark stinks inbox, so it's from Andrew, but I don't know what state Clark, you stink because you've told us how to be alerted to great airfare deals and then figure out a reason to visit that city. But you haven't provided the same guidance for people who want to take road trips instead of plane rides. Is there a Kayak Explorer equivalent for hotels? It seems that most websites will only give us prices when we search for certain places on certain dates. But what if we can travel anytime, anywhere and just want alerts for screaming hotel deals that will motivate us to load up the dogs in the car and go exploring a new city.

[Clark Howard]

There is no equivalent, Andrew, because the hotel market is so diffuse. But no matter where you want to go stay, there are deals in a hotel market. There are deals based on the calendar. So if you're thinking of hopping in a car in cities that are big convention cities, the hotel rates, both city and suburban, completely controlled by the hotel market. Think Atlanta, Chicago, Las Vegas are three examples of that, where the convention business controls the prices. It was funny because I read a story recently where a reporter specifically booked four different levels of hotels when there was no big convention in Vegas and their cheapest room was 11 a night. And it was a nice hotel, surprisingly so. You got the calendar is your friend. And so when you're thinking, hey, what if we went there? You could go see different dates, what rates are. So it does require some manual work. The other thing, with any metro area, the outer ring hotels are a tiny fraction of the cost of inner ring hotels. Think of all these exits in a metro area where there'll be 10 or 12 different hotels at the exit. You know, two and a half to three and a half star hotels that have almost always free parking. When you take a trip to a big metro area and you stay close in, the hotel rates are far higher and you have to pay for parking and you might have to pay a resort fee. So outer ring counties in a major metro area, that's always my go to to try to find a deal when I'm traveling somewhere. But yes, there's an opening in the marketplace if somebody can come up with a tool that gives you the ability to shop for hotels and see just where the best deals are in America, nobody's decided that that's an opportunity in the marketplace. So maybe, Andrew, that's your opportunity in the marketplace. And I hope you have an absolutely wonderful rest of your day. What we're all about, that you learn ways to save more, spend less, and avoid getting ripped off. And the question for you, why is it save more? Is first, because it all starts with you from every dollar you make, putting aside a decent amount of it up front so that then you live on the rest. You can have the best of intentions to save money, but if you don't put that money aside up front, human nature being what it is, it just doesn't happen.