Pod Insights The Clark Howard Podcast 06.09.25 Vanguard’s New Cash Management Account / Debt Collections About this episode In today’s episode, an ongoing concern - where should you store your cash? One of Clark’s favorite children (discount brokers) has just launched a new offering worthy of your attention. Also today, dealing with debt collectors. Some are legit, some not so much. Know what to do if the debt is indeed yours, or if it is a mistake. Clark has key information for handling collectors in a way that protects your rights and your credit. Vanguard Cash Plus: Segment 1 Ask Clark: Segment 2 Debt Collectors: Segment 3 Ask Clark: Segment 4 Mentioned on the show: Vanguard Cash Plus Account | Vanguard Uni - One Toll Pass. 19 States. Car Insurance Archives - Clark Howard Association for Independent Agents | IIABA How To Send a 'Drop Dead' Letter to a Collection Agency What to Do When You're Being Harassed About an Old "Zombie Debt" We’ve still got some protections against medical debt collectors National Association of Estate Planners & Councils - NAEPC What Is a Fiduciary Financial Advisor and Do I Need One? What’s the Best Way To Exchange Dollars for Foreign Currency? What Is a Backdoor Roth IRA? 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
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1:05 Speaker 02 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,
1:50 Speaker 02 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? As 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.
2:34 Speaker 02 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 it. It 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
3:16 Speaker 02 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 most people who have a Vanguard account, and it can be linked directly to if you still
3:59 Speaker 02 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.
4:43 Speaker 02 Think how often banks pay you zip on your checking account, even if you've 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.
4:58 Speaker 02 And now it's time for questions.
5:01 Speaker 03 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? Looking for pros versus cons on ways to lessen the monthly payment when buying a house.
5:19 Speaker 02 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,
6:02 Speaker 02 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 get 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.
6:46 Speaker 02 But real movement in mortgage rates is going to require two things: lower inflation and federal spending that's not out of control.
6:58 Speaker 03 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?"
7:16 Speaker 02 For a one-time visit, there's really not a great alternative than 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
7:55 Speaker 02 a portable pass known as the UNI. And it works so far in 18 states with toll roads. And you're in Texas, right?
8:06 Speaker 03 And he's in Minnesota and going to Texas.
8:08 Speaker 02 Oh, I thought it was the other way around.
8:10 Speaker 03 Going to Houston to pick up father-in-law and bring him back to Minnesota.
8:14 Speaker 02 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
8:54 Speaker 02 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 U-N-I 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.
9:26 Speaker 03 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."
9:36 Speaker 02 Hope she was okay from each of those.
9:38 Speaker 03 "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. I'm appreciative."
9:48 Speaker 02 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,
10:33 Speaker 02 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 a 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," actually, there's a trade association we've given before for independent agents. It's independentagent.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,
11:18 Speaker 02 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. And 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,
12:01 Speaker 02 and that's the debt collector calling to hassle you about a debt you have. I want to talk about your rights.
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14:06 Speaker 02 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.
14:46 Speaker 02 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?
15:29 Speaker 02 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 gotta 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.
16:08 Speaker 02 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 owe. And if you don't say anything, the lie becomes the truth in 30 days.
16:50 Speaker 02 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
17:32 Speaker 02 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, let's say it was a settlement. But whatever you agree to in a payment plan or in a settlement, you need to honor your part.
18:14 Speaker 02 Now with a settlement or a payment plan, you're getting a theme here. It's gotta 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.
18:58 Speaker 02 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.
19:39 Speaker 02 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. They're not contacting 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.
20:14 Speaker 03 All right, here are some questions for you, Clark.
20:17 Speaker 02 I'm ready.
20:18 Speaker 03 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.
20:27 Speaker 02 Oh, I'm so sorry.
20:30 Speaker 03 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? 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.
21:03 Speaker 02 Gosh, I mean, the circumstance you describe is absolutely crushing. I feel so badly for you and your three-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. It's a more expensive lawyer, but you're not going to need that many billable hours. You've got enough money here. I want you to sit down with a lawyer who does wills, estates, and trusts.
21:48 Speaker 02 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.
22:31 Speaker 02 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, it's not any lawyer, Dallin, it's a lawyer who specializes in wills of states and trusts.
23:07 Speaker 03 Maybe a fiduciary too.
23:08 Speaker 02 You mean in terms of financial planning?
23:11 Speaker 03 Right. Like, maybe it should go into 529, like, a certain amount of it and things like that.
23:15 Speaker 02 Right, right.
23:16 Speaker 03 Because that could turn into a wrath if she doesn't go to college.
23:18 Speaker 02 Yeah, so, Dallin, 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 three-year-old, and best to both of you.
23:46 Speaker 03 Mm-hmm. 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 20,000 US dollars, 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.
24:14 Speaker 02 Well, first of all, that's 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.
24:43 Speaker 02 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,
25:28 Speaker 02 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 won 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 20,000 US dollars in won, which would be, I think, a bunch of millions of dollars a won. The difference in how much money your son would net out from one money exchange service to another.
26:07 Speaker 02 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.
26:31 Speaker 03 Okay, 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?"
26:50 Speaker 02 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 a 7K into a backdoor Roth, what that is, is a nondeductible IRA. You weren't eligible for a traditional IRA.
27:29 Speaker 02 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, a traditional IRA versus a Roth IRA can become a better idea because you're already at such an extremely
28:14 Speaker 02 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's someone in an income-based
28:56 Speaker 02 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.
29:35 Speaker 00 UKG is the workforce operating platform with unified HR, payroll, and workforce management. Built to solve the unique challenges of frontline work. Powered by People First AI and decades of labor data, UKG turns workforce intelligence into real-time decisions around staffing, pay, compliance, and productivity, enabling every worker to confidently take action as work happens. Because when work works, everything works. Learn more at ukg.com/work. UKG: HR, Pay, and Workforce Management.
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