04.14.25 Clarkonomics: What Is Stagflation / Pay In 4 Gets Worse

Today brings a Clarkonomics session on something much in the news - the potential for stagflation. Clark explains this economic environment and how you can prepare. Also, something terrible just got worse: Pay in 4. Why you should just say NO to Buy Now Pay Later. Clarkonomics - Stagflation: Segment 1 Ask Clark: Segment 2 BNPL Spells TROUBLE: Segment 3 Ask Clark: Segment 4 Mentioned on the show: Certificate of Deposit (CD): What Is It, Best Places To Open One 18 of the Best High-Yield Online Savings Accounts in April 2025 Are Money Market Funds a Safe Place To Stash My Savings? Why Big Banks Are a Bad Place for Your Cash Social Security Fairness Act: Windfall Elimination Provision File a Consumer Complaint / Air Travel Service Complaint | secure.dot.gov Axios: BNPL is everywhere / Why 'Buy Now, Pay Later' Worries Clark Howard How To Improve Your Credit Score in 5 Key Areas What Is a Secured Credit Card and How Does It Work? Why Clark Howard Wants You to Set Up a 'Financial Chromebook' Clark.com resources Episode transcripts Community. Clark.com / Ask Clark Clark.com daily money newsletter Consumer Action Center Free Helpline: 636-492-5275 Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:00Speaker 00

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• 0:48Speaker 01

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• 1:21Speaker 02

  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 I'm going to begin today's show with a Clarkonomics session on something you may have been hearing about in the news: the possibility of stagflation. What is it? How do you prepare for it? And what's the potential of stagflation anyway? Also, something I hate paying for by now, pay later, however you want to say paying for,

• 2:04Speaker 02

  not only does it stink, it's getting worse. Wait till you hear how bad it's become and why you should just say no. It's coming up later. So stagflation is something that you have to go in the Wayback Machine.

• 2:25Speaker 02

  But we had stagflation in the late 70s into the early 80s. Stagflation was a really bad scenario and economists hate because it puts an economy kind of in a straitjacket, hard for it to break out of. And stagflation happens when you have both a slowing economy or a recession and inflation going higher or high inflation at the same time. Now, are we going to have stagflation this year or maybe in 26? Hard to say.

• 3:08Speaker 02

  The signs are possible. Some economists would say probable that we're headed to stagflation. And so there are things you've got to think about with your own wallet. Inflation seemed to be bending the right direction, but the economic uncertainty we have going on in the country right now has been a twofer, pushing prices up more than they were going up and at the same time slowing the economy. And it usually, so most of the time, an economy functions almost separate from what goes on in Washington.

• 3:52Speaker 02

  But there can be policy mistakes from Washington that can lead to stagflation conditions. In the late 70s, it was actually foreign actors who were trying to bring the United States to its knees at a time when we lived overwhelmingly on imported oil and our enemies at that time among oil producers were trying to devastate the US economy and they succeeded. And so we ended up in a declining economic cycle with rapid inflation and some mistakes in that era by the Federal Reserve magnified the inflationary effect.

• 4:39Speaker 02

  Our conditions today are mild in the direction of stagflation from anything if you have relatives that were alive and adults back then, they can tell you what stagflation was like. It was bad. It was a bad economic environment. It was rough. We're not there. But let's call it stagflation light. What kind of things do you see? Well, I was talking briefly in response to a question last week and felt like I always get worried if I give like a quick answer to an individual question that I have not explained thoroughly the

• 5:23Speaker 02

  results that can happen. So as people get worried about the stock market and they may sell some of their positions or take money they might have put in the stock market and they don't, where does the money tend to go? It goes into savings accounts or CDs. So suddenly, banks and credit unions see more money coming their way for savings accounts and CDs. So what happens in the marketplace? The rates you can earn go down. So that's

• 6:02Speaker 02

  why we're seeing a lot of interest rate cuts that you and I can earn on savings and CDs. But there's a window right now here in mid-April where you can still put money to work in an online savings account at a decent rate, not the higher rates that we were seeing months ago, and CDs decent rates, but not the high rates we were seeing a year ago. But you can almost certainly still earn somewhere upper threes to mid fours on a savings account,

• 6:44Speaker 02

  an online savings account with the rates changing, they can change every day.

• 6:50Speaker 02

  But the opportunity, if you've got money that you want to put in a CD, money you're not going to need for a year or so, there's still a window with a lot of the online banks where you can earn somewhere around 4.5% plus or minus on the one year. And it might be harder to find as you go out in term, find a rate at that kind of level. But the one thing not to do, not to do, and you'll hear me say this over and over again, unless you hate your wallet and hate your money, you do not put money in a savings account or a CD in a traditional bank branch.

• 7:35Speaker 02

  Because they wake up every day trying to figure out how they're going to cheat you out of a decent return on your money. And with the biggest banks, you put money in a savings account with them, you might be earning 1/100th of 1%. Where with an online bank, you could be earning 4 point something percent. So your money make the choice. Now, the other side of the stagflation light, as I'm calling it, is that because of the inflationary expectations building in the economy and the number of defaults on credit cards and vehicle loans right now,

• 8:19Speaker 02

  interest rates, even as the economy slows, interest rates on loans are going to stay stubbornly high and could even go up from here, even as what you can earn on savings is going down. It's why stagflation is a very anti-consumer and anti-worker kind of environment.

• 8:43Speaker 03

  Okay, Bob in South Carolina wrote in with this. Has Clark mentioned the Windfall Elimination Act and its impact on Social Security payments? My wife, a retired teacher, has been a beneficiary of the act after having been severely penalized for many years. Does Clark have any comments on the act or how it's being implemented? When I access her online account, there's no information on the payment or her eligibility. We got a lump sum deposited into our account with no explanation, which causes some concern that something fraudulently or an error may have occurred.

• 9:13Speaker 02

  Wait, money falling out of the sky? When does that happen?

• 9:16Speaker 03

  I know, really. After two weeks, we finally got a letter from the SSA explaining in government speak what was going on. And Wes did do a segment on the Ask an Advisor show that we do on this, just so you know.

• 9:28Speaker 02

  Yeah, so there were a lot of state and local government employees who were, under prior congressional statute, were made ineligible to receive Social Security. And even weirdly, there are people who had paid into Social Security at different points during their working lifetime, who were no longer able to receive Social Security because of employment in state and local government. So Congress, in its wisdom, that had set up that system, changed it with the Windfall Elimination Act. So there are people now receiving some measure of Social Security, plus these, kind of like bonus checks.

• 10:13Speaker 02

  And so if one shows up, like money falling out of the sky, and you're wondering, scam? Real? Scam? Real? If you go to the Social Security website, there is an explanation that I think is better than governmentese, that explains who's eligible and how the money is being paid. And so this is a legitimate thing.

• 10:39Speaker 03

  Julian Florida says, "I need help with one of the big airlines. I'm a working mama with three kids ages nine to 14 and a not-so-helpful ex. I get by with a lot of help from my friends. I had a nightmare business travel day getting home from Phoenix to Orlando. The trouble occurred at DFW. I had paid extra to change my ticket so I could get home early because my son wasn't feeling well."

• 11:00Speaker 02

  Okay, you might as well. Anybody who travels a lot, you gotta be talking about American Airlines?

• 11:05Speaker 03

  Yes.

• 11:05Speaker 02

  Okay.

• 11:06Speaker 03

  "Her son wasn't feeling well. At my connecting flight, I got to the gate in the nick of time and the gate agent refused to seat me after giving up my seat to an AA crew member. She sent me down to customer service and they rebooked me quickly, although I had to advocate to get the same seat I had paid for in the comfort class so I could be certain to have overhead bin space. Then, when I get to the next gate, my carry-on, which I have been carrying with me through multiple earlier flights, which also fit in the carry-on sizer, was refused. When I respectfully advocated, I was told if I had a problem, I could talk to security. I kept my mouth shut and boarded the plane. At this point, the $300 I had paid to get home early was completely wasted. I racked up two hours because the agent wouldn't let me board after giving up my seat to a

• 11:49Speaker 03

  crew member, and then it took another 45 minutes in Orlando to pick up my bag. I contacted the airline customer service. They told me there was nothing they could do. They're sorry and hope that they can make it up to me on the next flight."

• 12:01Speaker 02

  Okay, Julie, if you go on any of the frequent flyer blogs and you read what people are saying about the customer no-service problems at American, they become legendary, and not in a good way. And file a complaint at DOT.gov. That seems to be the only way that you get any compensation from American. Also, the credit card that you paid for the costs you incurred...

• 12:33Speaker 02

  The extra costs may have delay coverage built into it where you can make a claim with them to receive back some of the money. But Americans' attitude, the way I read Americans' attitude from everything I'm seeing is, yeah, yeah, we'll just put somebody else in the seat. You don't want to fly us, you say you're not going to fly us, go fly somebody else. It's a pretty hard, harsh environment right now at American Airlines for customers. And, you know, there's a lot of talk about this, the problems at American Airlines in terms of attitude towards customers.

• 13:11Speaker 02

  And that American gets a lot less revenue per passenger than the other two full fare airlines, Delta and United. And I think it's really because of this attitude problem at American towards customers that if you treat people like American seems to have developed a reputation for treating people. And people have a choice in who they're going to fly and they're business traveler, full fare traveler, they're more likely to go to Delta or United. Just look at the numbers and you'll see that whether it's perception or reality, that's what the marketplace is saying.

• 13:54Speaker 02

  And American, you used to be able with other airlines where you'd post something on social media and then they say, let's, let's do a DM here and let's see if we can get this solved. That doesn't seem to do anything from what I'm hearing, from what I read at American these days.

• 14:12Speaker 03

  Donna in Florida says, you talked about shaming companies that don't keep their promises, horrendous customer service, et cetera.

• 14:20Speaker 02

  Okay, this is funny. Go ahead.

• 14:24Speaker 03

  You definitely should. You would keep your listeners informed and not waste their time. Also, no company wants a bad reputation.

• 14:32Speaker 02

  Okay, did you just pull that out of like your pocket?

• 14:35Speaker 03

  No, but Donna obviously doesn't think you name enough companies.

• 14:40Speaker 02

  Okay, that is a riot. Okay, Donna, so it's so funny because, you know, Krista read the thing and she said DFW. So I knew immediately it was American. Anybody who travels frequently knew that that plane change, Phoenix or Orlando was in Dallas. They would have known the whole story was about American. And I've been reading so much about the revenue problems at American and the service attitude issues at American. And so, in this case, it's such a known event that relating that it was American was not an issue of reputational harm. I'm very careful

• 15:20Speaker 02

  when I name a company. If we don't know that the story we're hearing is valid, but the pattern of problems at American is such that I name them. So I'm picky and choosy when I do name a company because of the fact that often we don't know that the story we're hearing is actually what happened. And I don't want to harm a company's reputation unnecessarily. And then there are times that the pattern of problems at a company is so clear that even if this one case is that three-story thing, your story, their story, the truth,

• 16:01Speaker 02

  I think it's fine to give people the heads up that American has a problem right now. And it goes all the way to the CEO. Goes all the way to the top that American does not have a culture that is customer oriented. And that's just the fact. So I want people to know when they go to buy a ticket, yeah, that ticket on American's a lot cheaper, but what's that experience going to be like? That's just something you gotta know. So that's why you hear me sometimes talk about companies, sometimes don't. And sometimes I'll make a mistake. And I won't mention a company when I should have, or reverse.

• 16:45Speaker 02

  So I just try to be very careful with that. And I just think that's so funny Krista read that right after. Coming up ahead, let's talk about something that I make no bones about that I despise. Pay in for, and suddenly, something terrible just got worse.

• 17:09Speaker 04

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• 17:38Speaker 02

  I had been very familiar with all the problems in other countries people had had with these hideous pay in for programs. And now even credit card companies, afraid of the market share they're losing to the awful pay in fours. Now we're saying in some cases, hey, you know, pay this in four, because they're getting market share. People are using pay in for as a shortcut to make decisions that burn up their wallets. See, pay in for is something that the airlines love, retailers love, and now even fast food restaurants love.

• 18:21Speaker 02

  Because you on food apps, some of them, DoorDash is an example, you can do pay in for on the food delivery. That's what I need to do. I need to pay in for a meal from McDonald's. So four easy payments of $1.25 each. Oh, come on, really? I mean, why, why do I hate pay in for so much? Why did I hate it before it hit our shores so much? Because it plays tricks on your mind. You think, well, you know, I really like that. But I can't really afford it right now. But hey, look. Payn4 is available.

• 19:06Speaker 02

  All I have to do is click here online. Or at the register. It's like, yeah. I'll do Payn4. And then, man, you know what's weird? Payn4 didn't mean you didn't have to pay for the item. It just meant you didn't have to pay for it that second. And then you got to make those four easy payments. But often, people don't have the money to make the four easy payments. And now, more and more, your payment record on Payn4 is now being reported to credit bureaus. And more and more people are ruining their credit from the Payn4. So what good use is their Payn4? I'm a business owner. I want to boost my sales.

• 19:52Speaker 02

  And Payn4 does that. For me. But what does it do to you as the customer? It's trouble? Not just with a capital T, but every letter of trouble is capital letters flashing. So next time you're at a website and you're thinking, hey, I'd really like that outfit. Or whatever it is. Thinking, oh, look at that. I can just click here and Payn4. Or you're at the retailer and they're offering it to you. Or you're really just dying for that Big Mac. Or whatever. Oh, my goodness. Don't fall for the temptation. Know that this is manipulation

• 20:37Speaker 02

  of you to get you to spend money that maybe needs to not be spent to keep your finances sound.

• 20:47Speaker 03

  Oh, man.

• 20:48Speaker 02

  I remember, I remember we were in a meeting, one of our weekly Monday meetings. And I had seen a story, I think it was two, three years ago, that this Australian company was coming to the United States with Payn4. And nobody other than me was familiar with it. And I was talking about it. Y'all were all looking at me like.

• 21:11Speaker 02

  Why is he so upset about this?

• 21:13Speaker 03

  I think it was more than that because I know that I used paying for in 2020 on my Peloton bike because it was 0%.

• 21:20Speaker 02

  So it's been longer than that?

• 21:22Speaker 03

  Yeah, and that actually worked out well for me because I had the money to do it, but I was like 0%. You know, I mean, of course, I barely earned interest on the savings account, but I did use it the right way. But I know, I remember you getting so upset about it. I can see college students like doing this with their pizza orders and stuff. What a nightmare. Okay, let's go to questions. On that happy note, Bob in California, is there a downside to signing up for too many credit cards? I sign up for a card with a big signup bonus, like $900 or 80,000 miles. I meet my required spending during the first 90 days, then I put the card in a drawer. If the card has an annual fee, I close the account before the end of the year. I'm a 60-year-old retired school teacher. My way of saving is not spending.

• 22:06Speaker 03

  Everything is paid off. My credit score is over 800 and I rarely use my credit score since I don't spend my money.

• 22:12Speaker 02

  It's fantastic. I mean, go for it. Why not? If you will play the, it's like people who ask us about the things where they will send you something. How'd you like $500 to open a checking account with us? If you're somebody who will play the game exactly as required and close that checking account after the six months they may require, you keep it open so you don't get stuck with all the giant bank fees, go for it. If you want to play the credit card bounce around game, know eventually you'll run into the Chase and American Express things where they say, nope, nope, no bonus points for you, no bonus dollars for you. Because they each have ratios that are designed to punish people gaming the system.

• 22:57Speaker 02

  But the system is there to be gamed, and if you do pay everything in full, your credit score stayed solid, keep doing it.

• 23:05Speaker 03

  And you just talked in our meeting about credit card debt in the US.

• 23:08Speaker 02

  Yeah, ugly.

• 23:10Speaker 03

  It's, what is it, the highest in?

• 23:12Speaker 02

  Highest, I think, since the dot bomb bubble burst in 2000, or was it?

• 23:19Speaker 03

  I think you said 13 years.

• 23:21Speaker 02

  13?

• 23:22Speaker 03

  Yeah.

• 23:22Speaker 02

  I forget the exact date I read.

• 23:24Speaker 03

  Unlucky 13.

• 23:25Speaker 02

  Yeah.

• 23:26Speaker 03

  Lucas in California says, hey Clark, I've got a Capital One Quicksilver card. I got this card probably eight years ago. When I first got it, I originally had a credit line of $1,500. I didn't really use it just for emergencies. Starting a couple of years ago, I've been using it more and I've built up my credit score. I've got an excellent score, but my available credit is only $775 now.

• 23:48Speaker 02

  Oh, that's dangerous.

• 23:50Speaker 03

  When would it be a good time to ask them about an upgrade so that my credit limit ratio usage is lower than that 30% number you always talk about? I enjoyed your advice on having two credit cards from this, not from the same company. So I tried to get another card and I did not get approved for it. About six months ago, I applied for the Amazon credit card and I got approved for that for $3,000. But two months later, they canceled it on me, saying it was something to do with the bank that I closed an account there like 10 years ago. So I do not know what to do. I'm responsible with my finances now. I save, I invest. What else do I have to do here? My credit score is 785. What gives?

• 24:26Speaker 02

  All right. So Lucas, if your Capital One Quicksilver still has a $1,500 limit, you're above 50% ratio, that puts you in a real danger zone with any credit issuer. And you're now in danger of people not wanting to do business with you for any kind of credit. Because that 30%, they mean it. So before you do anything else, the number one thing you've got to do before even Capital One will consider a limit raise, you've got to pay down that, that 775. Cause you're at 53%, whatever.

• 25:07Speaker 03

  I think he's, no, this was avail, I think what happened was they lowered his available credit limit to 775 from $1,500 because he wasn't using it enough.

• 25:17Speaker 02

  So you, you mean the whole limit is 775?

• 25:20Speaker 03

  Right.

• 25:21Speaker 02

  All right. So this is something we have been hearing that cards that are used sparingly, the issuers are worried that you'll suddenly start charging them up if you hit financial hard times. And so they unilaterally start cutting limits or closing accounts. If that's what you're saying is the situation with Lucas. If that's it, we're, we're interpreting your words as best we can. Then I want you to, to contact Capital One and ask if you're eligible for a limit increase. And one of the things Capital One will ask you is a re-verification of income. And if your income is fine, obviously, your credit standing is good, you pay all your

• 26:06Speaker 02

  bills, you need to see if you can get a higher limit from them because others are going to turn you down, particularly when you've had a degrading of your limit with somebody else. Also, if you're a member of a credit union in California, you should go into the credit union, or join one, so you can do so, and see how you can qualify for a credit card with them. That would be a good start. You know, credit unions are now more and more playing the same game as the big issuer of cards. And instead of offering airline stuff, they're offering a lot of cash back cards. And so a credit union card could be

• 26:49Speaker 02

  a good outlet for you to get and to use.

• 26:52Speaker 03

  John in Arizona says, I thought I heard Clark say something about moving all finances to one laptop and using that laptop for that use only. Did I hear that right? And if so, is a Chromebook a good choice? I would like to use it to track my accounts and pay my bills.

• 27:06Speaker 02

  So John, gosh, you're so on the money, because the laptop I was talking about was getting a Chromebook only, because the special design of a Chromebook, it makes it much less vulnerable to viruses. And so Chromebooks are cheap. They're the new Chromebook pluses, which have apparently extra things built into them that make them even more secure. And you avoid the risks that come with so many of the viruses that attack Windows computers, and to a lesser extent, MacBooks.

• 27:47Speaker 02

  But the Chromebooks are the absolute safest to use as your financial device. Also, using financial apps on your cellphone has proven to date to be a very safe way for you to transact financially using apps versus using a browser. Browser on a laptop, the app on a phone generally is going to be potentially the safest way, at least at this moment, for you to do financial things. But I love a Chromebook used solely for financial purposes.

• 28:31Speaker 02

  And I want to thank you so much for joining us on today's podcast. And I want to remind you that all week long, Monday to Friday, we have available to you 30 hours each week of free one-on-one advice from the Team Clark Consumer Action Center. You have a problem, you have a question, whatever, you can get that empowerment of knowledge and confidence to solve a problem through our Team Clark Consumer Action Center. You want to see how to contact us? Go to clark.com/cac. And everything we do is all about you learning ways to save more, spend less, and avoid

• 29:15Speaker 02

  getting ripped off. And I'll see you on Wednesday.