06.25.25 Warehouse Club Wisdom / Working Your Way Out Of Debt

Concerned about the economy and looking to save more, many people are turning to warehouse clubs. The price difference is real. But Clark has concerns about what his beloved Costco is up to with a new payment option he does NOT recommend. Also, the debt burden many of us carry is also very real. Clark discusses how people are working on getting out of debt. The Warehouse Club Difference: Segment 1 Ask Clark: Segment 2 Dealing With Debt: Segment 3 Ask Clark: Segment 4 Mentioned on the show: Inflation-weary Americans queue for toilet paper and cheap Bordeaux Warehouse Clubs Archives - Clark Howard Why 'Buy Now, Pay Later' Worries Clark Howard What Is FedNow? / ⁠Clark.com Community - Paze⁠ Why Clark Says You Should ‘Ignore’ Paze as Trendy New Payment Option Debt Archives // Budgeting & Saving Archives - Clark Howard 30 Easy Side Hustle Ideas How to Make Extra Money: 35 Easy Ways How Do Student Loans Work? 7 Things to Know Is It Ever OK To Co-Sign a Loan With a Family Member? What's the Best Savings Account for a Teenager? Fidelity Investments Review: Pros & Cons How To Open a 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

• 0:00Speaker 00

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• 1:05Speaker 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 that you make better financial decisions in your life. I hope one of the decisions you make is to sign up for one of our free newsletters at Clark.com/newsletters. They're not just free, they're priceless. Because when you open up that newsletter, there's gonna be a lot of stuff that gives you ideas to stretch every dollar, to rethink how you make financial decisions day to day.

• 1:48Speaker 02

  Speaking of which, if you have listened or watched me for any period of time, you know I am obsessed with the warehouse clubs. Is it an unhealthy obsession? No. It's a very healthy obsession. And the sales of the warehouse clubs, the revenue they're bringing in, booming, booming.

• 2:15Speaker 02

  Sales at BJ's Wholesale are up 4%, Sam's Club up almost 7%, Costco up 8% because people recognize they're getting a better deal with them. And I want to talk about that straight ahead. There's also something Costco's doing that I don't like at all. But coming up ahead later in the podcast, I want to talk about how people get out of debt. And there's a way that people are getting out of debt that maybe you haven't thought of if you're facing debts in your life. I'm going to talk about that later in this podcast and YouTube show.

• 2:59Speaker 02

  But right now, I mean, you can see it. I was at a Costco, well, that's new. I was at Costco the other day, not a space in the parking lot, and people were getting really, well, unruly in the parking lot, fighting over spaces, not physically, but I'm sure that happens, honking at each other when they thought they were waiting for a space that somebody else zipped into. And that's how strong the demand is. And I was in a Sam's Club. This is really a shock. I was in a Costco one day and Sam's the next day because they sell different stuff. I was at the Sam's, something you shouldn't do. I was in the

• 3:44Speaker 02

  Sam's on a Sunday. Okay, the checkout lines were unbelievable. So they were back in the aisles in the Sam's Club, way back where the merchandise is, long, long, long, long lines, all the way. And guess what? Every register was open. That never happens, right? They were all open. And these lines were huge. So people have switched how they buy because the price differences are real. And so I actually enjoy the experience. But I was very upset. There was a quote in the Financial Times of London, I want to see

• 4:26Speaker 02

  if I can find it in this story, because it really bothered me. It's a little bit of a grudge shop. You don't want to spend your Saturday afternoon roaming around 100,000 square foot box. You don't? I do.

• 4:45Speaker 02

  I do. I want to save that money. I want to look what's up in the steel. I want to save that money. You're not going to believe who said that quote. It was the CEO of BJ's Wholesale Club. Come on, Bob. Get with it. It's not a grudge shop. You do want to spend your, well, you don't want to spend your Saturday or Sunday. You want to spend early in the week in the evening when the store is quiet, or much more quiet, shopping. And I know there are people who say, what a ripoff. I have to pay a fee to shop at this place? Let me tell you, it is worth it.

• 5:24Speaker 02

  Because you're going to save so much money. So, going back to the Sam's, when I was in one on a Sunday, because I hate myself. How did I deal with those long checkout lines? Like every Sam's Club member should with your phone. Use scan and go. You check yourself out. You scan your own items. You walk out the door, never having to wait in a line, other than if the AI says, hey, we need to check your purchases. Otherwise, the AI automatically says you're good to go and you keep walking out the door. But this is the real deal. The money you can

• 6:07Speaker 02

  save at warehouse clubs. And I know there are people who don't love being with packed aisles and all the rest. Better deal at Sam's than at Costco. If you buy their premium membership, you get free delivery at the same price as you pay for an item in the store on almost everything. Free delivery. So you don't even have to leave your phone or your laptop to go deal with the parking lot, to deal with shopping inside. It's your money.

• 6:43Speaker 03

  All right.

• 6:43Speaker 02

  How long have I been obsessed with warehouse?

• 6:46Speaker 03

  I mean, since before I knew you, for sure.

• 6:49Speaker 02

  I go all the way back to Price Savers and Pace Membership Warehouse.

• 6:55Speaker 03

  Yep.

• 6:56Speaker 02

  Both long gone. Do you know who owned Pace Membership Warehouse?

• 6:59Speaker 03

  No.

• 7:00Speaker 02

  It was started by what was then the world's largest retailer, Kmart.

• 7:05Speaker 03

  Kmart. Oh, wow.

• 7:08Speaker 03

  All right, we're good questions. Jonathan in Florida, because affirm, Costco's taking affirm now.

• 7:14Speaker 02

  I hate that.

• 7:16Speaker 03

  Yeah, that's what you're upset about. So you'd mentioned that you're upset about that.

• 7:19Speaker 02

  Yeah, I cannot stand paying for, I mean, it is digging people a debt hole that is really ugly in their lives.

• 7:28Speaker 03

  So that was the thing you don't like that Costco's doing. So Jonathan, Florida, wrote in with this. I wanted to ask if you've heard of the borrow feature from Cash App. It appears most start out at $25, however, I've seen where people can get up to $1,250. You can pay back weekly or monthly, but have to pay back within four weeks. The fee is 5% of the borrowed value. Would you see this as a better option than charging on a credit card?

• 7:50Speaker 02

  No, because credit card interest per month is lower than what we're talking about with Cash App. So remember, if it's 5% for the month, what is that per year? If you compound that, it's quite a bit more than 60%. Now, if somebody's in a position, though, that they're having to consider doing a payday loan, or doing the Cash App loan, the Cash App loan is the least bad option. It's much cheaper than taking out a payday loan. But no, I don't, I don't like any of these gimmick borrowings at all.

• 8:27Speaker 03

  Okay, and then Amy in Georgia says, Clark, I think if you had the authority on scams and identity theft issues, I would like to run a scenario by you and your team to see if you think I have a reason to be concerned, or if I'm just being paranoid. While getting a pedicure, the lady in the chair next to me struck up a conversation. You're somewhat forced to be polite to strangers at a nail salon as you can't really walk away. Your hands and feet are literally stuck. The woman was asking me what I did for a living, telling me the ages of her children, all the normal things. She got up to get another nail salon service and struck up a conversation with a college-age girl. I assume they knew each other, but later found out they did not. She was telling this woman all about her family, their ages, where her siblings went to school, even photos on her phone.

• 9:10Speaker 03

  She came back to my chair to see my nails and started asking me where I was going in the summer. She asked my name, joked about getting my phone number, asked me- A million questions about my favorite beaches and vacation spots, saying she was from South Africa, she had the accent, and wanted to know places to see with her family. She started pressuring me for specifics, name of the condos we liked, what items I packed with me to go to the beach, where I was from, and what was my last name. I did not give her any of this information as my alarm was starting to go off. Is this a new way to record voices? She grabbed my phone at one point to see a beach photo. Help, should I be worried?

• 9:45Speaker 02

  So Amy, that's a lot of work for somebody to go through to engage in some form of identity theft or takeover fraud. It is possible, but I would say that's pretty far out there. This may just be somebody who's really gregarious and a little too forward friendly. I would be surprised because it's so easy, truthfully, to do identity theft now that I don't think somebody would need to spend the time in a nail salon to do that. I think it's just somebody who made you and maybe the college kid feel uncomfortable by how they went beyond personal boundaries.

• 10:28Speaker 03

  Although, never hand someone your phone, ever, ever.

• 10:31Speaker 02

  Yeah, oh yeah. We've talked about that before, how dangerous it is to give anybody your phone because of how, once you've unlocked it, if you have Big Bad Zelle, you have Cash App, like we were talking earlier about Venmo, they can Venmo themselves money and there's nothing you can do, once that's happened, to get that money back.

• 10:56Speaker 03

  Amy in Wisconsin says, I received an email from my Chase credit card offering to enroll me in their new program called Pays. We've gotten a lot of these questions. The offer says Pays is a convenient way to pay online, brought to me by the banks. How is this different than Zelle, which was also owned by the banks? You warned not to use Zelle because of a lack of financial protections provided by the banks. Is this new Pays program any more secure?

• 11:18Speaker 02

  Right, so let me tell you, I'll give you a short version, because I talked about Pays before. The banks are terrified of us adopting the world standard. Ours is called Fed Now, and the banks are terrified of anything that levels the playing field where apps and credit unions and small banks can compete with the big banks and all that. So the big banks put together ownership of an alternative to this very, very secure system called Fed Now. They don't want to use, and they don't want you using it.

• 11:58Speaker 02

  So they're trying to act like pays is some kind of wonderful, brand-new way for you to transact, pay bills, send money, and all the rest. It is not clear that there are decent consumer protections, because I haven't been able to find them yet, using pays. And that's why I've said ignore the push by your bank for you to use pays. When there are clear laws and regulations for pays that would make it a secure, safe platform for you to use, then it'll be up to the marketplace if Fed Now or pays or

• 12:40Speaker 02

  whatever else becomes another way for you to transmit. There's going to be a lot of action in this area because the banks are in terror of fintechs, non-bank actors, taking more and more of the banking activity away from them. I mean, already, banks have become nearly irrelevant in people's financial lives as money overwhelmingly has moved to Wall Street players. And you think of big ones like Schwab, Fidelity, Vanguard, they're so much larger now than the banks. The banks are doing anything they can to try to keep some amount of market share.

• 13:25Speaker 02

  But, you know, if the banks did business where instead of trying to come up with cutesy little things like Big Bad Zelle or Now coming up with pays if instead the bankers woke up in the morning and said, how are we going to make things better for consumers? How are we going to make them better for customers? But that's not the mentality of modern American banking. They're always looking to get one over on you. And pays at this point is not a safe platform for you to use. At least, nobody's been able to convince me of that. So ignore the pitch from the bank to use pays. And I wish one of the big bad banks, one of the giant monster mega banks,

• 14:10Speaker 02

  could convince me why Fed Now is not a vastly superior way to move money around versus them coming up with a proprietary Frankenstein that they've invented. Enough about that. Don't use it, at least for now. Coming up ahead, after the ravages of inflation, a lot of people are really, really struggling with debts and make ends meet. I want to tell you something you're going to say, duh, how a lot of people are now getting out of debt. Acquire some work on your part.

• 14:48Speaker 00

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• 16:32Speaker 02

  The debt burden is real. And we have a lot of Americans who are struggling just to deal with the basics. Pay for food. Pay monthly rent. Stay current on a mortgage. Pay for your car insurance. I'm talking about stuff you know. I'm talking about have to's. I'm not talking about want to's. I'm not talking about leisure expenses or, oh, wouldn't it be fun too? I'm talking about just paying for basics. And if that's not you, it may be your kids, maybe your friend, maybe a neighbor is struggling right now financially. So how are people closing the gap?

• 17:16Speaker 02

  Do you know that we have the largest number of people ever in the United States working a part-time job? Nine million people. In addition to the regular work they do. They're doing a part-time job. They're doing an app-based thing like Uber or the food delivery. And there are people who realize, hey, you know, I've cut every corner I can. The only thing that can give is giving up some of my free time and bringing in more money so that I can do those things.

• 17:54Speaker 02

  So I'm not wheezing every single week, every single month, just to pay my regular bills. There was a study by Experian that found that just under 40% of people Who successfully got out of debt did it by having a part-time job in addition to their regular job. I mean, that's not a fun thing to say to you. It's not fun to say you've already worked these many hours. And if you want to tackle your debt, I want you to go work some extra hours somewhere doing something. That's not fun. It seems a lot more fun when

• 18:35Speaker 02

  you see those signs at freeway exits that say wipe out your debt, call this number, or go to this website. And they tell you they got the magic pill that's going to get you out of debt. Let me tell you, that's not magic. That's a con. Don't believe it. But if you do take on gig work or part-time work in order to handle bills, you gotta be careful with your expenses because sometimes when you then take on that part-time thing, you start maybe eating out more because you're out of time. You gotta watch those expenses

• 19:16Speaker 02

  as that happens. I'm in Ubers and Lifts a lot. I had a Lyft driver recently who the reason that he drives Lyft is when it comes time to pay his daughter's tuition for college, he drives Lyft in order to come up with money to pay the tuition so that she doesn't have to take out student loans. I mean, there are all different kinds of motivations why somebody works a part-time job. In his case, it was to avoid taking on debt. And it's cold, but defaults on credit cards are going up right now. It's fact. At the same time that

• 19:58Speaker 02

  the average interest rate on a credit card has gone from high teens to mid twenties. So that's putting salt in the financial wounds you may be feeling. And I may be talking to you right now, and this is irrelevant to you. Your finances are great. You're in solid shape. But know there are people around you that are suffering. And I want people to not have to worry, be afraid of answering their phone or getting a collection text, or seeing a collection notice in the mail. And so whatever you can do that relieves that financial pressure that makes sense over

• 20:43Speaker 02

  time and working part-time is one of the, the best things to get your finances back under control. Remember, almost 40% of people who've been carrying debt were able to get rid of it by working a part-time job. It's important.

• 21:00Speaker 03

  And we have a couple of great articles at Clark.com, 30 easy side hustle ideas, and then how to make extra money, 35 ways on that one. David in Ohio says, I have a daughter starting college this fall. She has some funds in a 529, but I intend to co-sign on private loans to cover part of the cost. My first question, am I correct in thinking that co-signing on private loans is slightly better than parent plus loans? It seems like I only hear horror stories about parent plus loans, but as a co-signer, they seem effectively the same in terms of ultimately putting me on the hook. My second question, if I started checking out various lenders such as SoFi, Sally Mae, or College Ave, am I going to get a bunch of hard inquiries on my credit? I know they say that applying for multiple loans in a short period of time shouldn't affect your credit much since you're clearly

• 21:45Speaker 03

  shopping around, but in my experience with shopping for car loans, I still ended up with numerous hard inquiries on my report, which Credit Karma said was hurting my score for two years. Also, I want to mention how easy it was to schedule a temporary thaw on all three credit bureau websites. Thanks.

• 22:00Speaker 02

  Okay, David, thank you very much for your question. So on the car loans and also for mortgages, applications, multiple applications made in a very short period of time, think a couple of weeks, even though they show up on your report, they only impact your score as if there's one. They don't think you're trying to buy six cars at the same time or buy six houses or anything like that. Shopping around does create a hard inquiry, multiple hard inquiries, but in the scoring model that FICO uses, multiple inquiries in a short period of time are treated as one. I've not heard of that for student loans, though,

• 22:43Speaker 02

  because it's possible somebody would be taking out student loans from multiple providers. And so those hard inquiries, I don't think are treated as one. I've never seen anything that says that. Maybe someone will let us know if I'm wrong on Clark stinks. But I do want to talk about people trash talking parent plus loans.

• 23:05Speaker 02

  The problem with parent plus loans is the same as you cosigning on a loan, except cosigning on a private loan can be worse. With a parent plus loan, what happens often is a parent out of love for their child, and the child's desire to go to a particular school, will take on more debt on a parent plus loan than they can handle. So be realistic with yourself, whether it's a parent plus or a private student loan that you would have to cosign for, that it's a level of debt you can afford. Most of the time, the parent plus loan will be cheaper than a private loan that you cosign for.

• 23:49Speaker 02

  A lot of private loans have floating rates. And so whichever is cheaper for a fixed rate would be likely the better choice. You won't have any avenue for potential loan forgiveness. With the private loans, you may well, depending on the circumstance, have partial potential student loan forgiveness eventually with the parent plus, although all of that is in flux right now. But with the private loans where you're a cosigner, you need to make sure before you cosign with any of those that you will receive bills as well as your daughter. Because when you cosign, you have all the responsibility,

• 24:34Speaker 02

  none of the privilege of the loan. If the bills are going to her, and she is a young adult, just doesn't get around to telling you, doesn't get around to paying them, your credit's ruined, and you're still obligated on the loan.

• 24:49Speaker 03

  Okay, Lisa in Minnesota says, "Per your advice, I opened a Fidelity Youth account for my 16-year-old daughter when she got her first job, and then for my son when he turned 13. My daughter's doing a good job at saving. My son is too young for a job, but has accumulated several hundred dollars in cash over the years. When I suggested we put some of it in his Fidelity account, he said, 'I want to put it somewhere where I can actually earn interest.' His Fidelity account funds, $175, are held in a money market fund, as are my daughter's. Aside from buying some stocks, which I'm encouraging them to do, what else can and should we do with the money to encourage them to save even more?"

• 25:25Speaker 02

  Lisa, first of all, with Fidelity, as with Schwab, got to make sure that the money market fund you're in is one paying a decent yield. Fidelity and Schwab both have money funds where they pay you a puny amount of money, and money funds where you're getting a good amount of money. So it'd be great for you to sit down with your daughter and your son separately. So you're each talking to each of them about money. She's 16. And talk about what is the purpose of this Fidelity Youth Account? The purpose should be to start building the building blocks for long-term wealth. Unless it's money she's going to use in the next few years,

• 26:10Speaker 02

  you're not using the Fidelity Youth Account for either of them for the purpose it's intended, which is to teach them the basics of investing. I would rather see the money for each of them put into the zero funds. And I would sit down and look at the Fidelity website and talk through what the zero funds do. In short, they're funds that charge no ongoing management fees, no commissions to go into them. So all the money is invested in the funds. And you sit there with your 16-year-old, 13-year-old, and I would do it separately again, and say, "Look at this." And have them in control of the computer. Saying, "Let's look at each of these zero funds. Read what they do.

• 26:55Speaker 02

  Which one sounds the most interesting to you? Get them invested in investing." And that's the whole idea of the Youth Account. As soon with your daughter working, her money should be going into a Roth IRA. Your 13-year-old, when the 13-year-old starts working, the money should be going into a Roth IRA.

• 27:19Speaker 03

  Okay, Miguel in Washington says, "I was recently in Las Vegas for five nights. Stayed in an off-the-strip casino. As I checked out, I was accused of smoking in my room, which I don't even smoke at all. They informed me that every room has a fresh air sensor and gave me a smoking alert paper report, which indicated a peak concentration at midnight when I was asleep."

• 27:40Speaker 02

  You smoke in your sleep. Do you know how dangerous that is, Miguel?

• 27:44Speaker 03

  I spoke to the general manager and had the smoking charge removed only after insisting on a room inspection with the GM. This feels like a junk feed news scam. Have you ever heard of this?

• 27:54Speaker 02

  I have never heard of this. And it's possible that it was not a scam, that it was a sensor that was misbehaving. I'll tell you what I do. I stay in hotels at least 70, 80 room nights a year. And when I walk in a room and it has the stank of smoke, I go right, I don't even unpack my suitcase. I go right back to the front desk and say, somebody smoked in that room. I can't stay in it because I don't want them to then find me hundreds of dollars for smoking to have happened. So the prevention is the best cure. In your case, Miguel, this is bizarre because their

• 28:38Speaker 02

  sensor said you were smoking when you weren't. Who knows if it was something with the ventilation system, somebody was smoking in another room. Who knows if their sensor just messed up. But you did the right thing, solving the problem while you were there. Really, really important. If you just say, well, I'll deal with it later, whether it's an airline, hotel, car rental, anything and travel, once you're not there, it's very hard from that point to solve a problem later. And I'm so glad you advocated for yourself and got the charge removed. And the GM did the

• 29:17Speaker 02

  right thing. It's crazy because I used to smoke forever ago. I haven't smoked in many decades. But now I'm really sensitive to the smell of smoking. And not only do I not want to sleep in a room that has that smell, I don't want to get a bill saying I did it. So I hope you have a great, great day. You know what else stinks? When I used to smoke, how much did it cost me for a pack of cigarettes? It was about 30 cents. Imagine that today. If you're still a smoker, think about that. I mean, back then, it was actually affordable to get sick from smoking.

• 30:02Speaker 02

  Today, it's not at all. Wow, that might generate a Clark Stinks. Anyway, speaking of Clark Stinks, that's coming up on Friday, and I hope you'll join us for Friday's Clark Stinks edition. And have a wonderful day, and I hope that you learned something today that helps you save more, spend less, and avoid getting ripped off.

• 30:31Speaker 00

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