Bankrate Archives

Infant care costs at least 10% of family budgets in most states: Study

October 31, 2024
It’s no secret having kids is expensive — from keeping them fed and clothed to making sure they’re cared for at all times — but it’s hard to say exactly how expensive they are. Now, for the first time, we’re getting an idea, at least when it comes to babies.

A newly released study by Brankrate shows care for just one infant costs at least 10% of a family’s yearly income in nearly every state. Child care has become one of the biggest expenses for parents nationwide, and Bankrate’s analysis found full-time center-based care in the U.S. cost an average of more than $14,000 in 2023 alone.

Bankrate found that’s more than a household’s average yearly budget for things like groceries ($9,985/year), health care ($6,159/year) and transportation ($13,174/year). In fact, the only big yearly expense Bankrate found costs more than infant care is housing, which costs an average of $25,436 a year.

Bankrate found there are only two states in the U.S. where child care adds up to less than 10% of a family’s yearly budget: North Dakota and South Dakota. Although North Dakota is pretty close, averaging 9.8%, South Dakota comes in at 8.7%

Infant care is the least affordable in New Mexico and Hawaii where it eats up more than 20% of a household’s budget every year. On average, American families spend about 15% of what they make on full-time center-based child care and for half the states, it’s more.

The nonprofit Child Care Aware America said most of the cost of child care goes to staffing because care centers are required to have a high ratio of adults to children for health and safety reasons. Even still, a recent analysis by the Federal Reserve Bank of Chicago found the median wage paid to child care workers is in the bottom 5% of all occupations.
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IRS makes it easier to use your retirement account as an ATM

July 16, 2024
For years, many Americans have struggled to build emergency savings and it’s only gotten worse with inflation and high interest rates since the COVID-19 pandemic. According to Bankrate, nearly 6 in 10 U.S. adults don’t feel comfortable with their level of emergency savings, and 27% have no savings at all.

However, the IRS is now making it easier for Americans to get $1,000 when they need it in an emergency, which could be anything from unexpected medical expenses to car repairs or groceries.

The Setting Every Community Up for Retirement Enhancement Act (SECURE) has been undergoing changes since 2023. Under the new law, those who need it can now take $1,000 out of a traditional retirement account without penalty.

The money does not have to be paid back, but if it isn’t, income tax will have to be paid on it. People can only make a withdrawal once a year, then they have three years to put the money back in order to avoid taxes.

The retirement account balance cannot fall below $1,000. So, someone with $1,500 in their retirement account can only borrow up to $500.
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46% of Americans are still paying off last summer’s credit card debt

July 8, 2024
July is the most happening travel month of the year. Americans jet off to beaches, national parks or theme parks, but nearly half are carrying more baggage than what is in their luggage.

According to WalletHub’s 2024 Credit Card Debt Survey, 46% of Americans are still paying down last summer’s credit card balance.

“And almost 25% of them reported being very stressed out about it, about their credit card debt in general,” WalletHub Editor Christie Matherne told Straight Arrow News. “And that’s probably because of this next stat, which is nearly half of people said that they carry debt on cards from everyday purchases, which can get really expensive.”

With the average credit card interest rate of around 23%, people are quickly falling behind on payments. Credit card delinquencies are up across the country, though some cities are increasingly struggling more than others.

WalletHub said in Chula Vista, California, delinquencies are up 85% in the last year. The city that is best off is Des Moines, Iowa, where delinquencies are still up, though by a much smaller 19%.

“That’s bad news,” Matherne said. “That’s not great. That means people are late on their credit card bills, they can’t afford to pay minimum payments, and that lands you in further debt with further problems.”

Nearly 1 in 3 people told WalletHub they will have more credit card debt by the end of the year. 2024 already started with record-high credit card debt.

Although 80% of people told WalletHub that paying their credit card debt is a top priority, summer vacations can put a snag in those plans. Of the Americans traveling this summer, 36% told Bankrate they are willing to go into debt to pay for it.

“I do see the disconnect between that and charging your vacation on a credit card when you’re still paying off last summer’s debt,” Matherne said. “And it also might be worth saying that people need vacations.”

As much as people need a break, nearly 1 in 3 Americans told Bankrate they are skipping summer vacation this year because they cannot afford it.

Credit card debt is not just about personal finances. As more Americans carry higher credit card balances, that financial strain stretches beyond the home.

“A whole bunch of money is ending up in credit card companies’ hands and less of it is ending up in our communities,” Matherne explained.

That slows consumer spending, the most critical component of the U.S. economy. It drives two-thirds of the country’s economic growth. That is why credit card debt and delinquencies can be a harbinger of a downturn if things do not turn around.
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A third of Americans say tipping culture is out of control: Survey

June 6, 2024
More and more Americans are starting to think tipping culture is getting out of control, according to a new survey. That same survey also found people are getting stingier when it comes to tipping for certain services.

The survey by finance comparison site Bankrate looked at multiple categories, including tipping restaurant waitstaff, rideshare and taxi drivers, hairdressers and food deliverers. It found tipping frequency across all categories has declined over the past few years.

Bankrate found the number of Americans who think tipping culture has gotten out of control is 35%, up 5% from last year. It also found a little less than two-thirds have some negative perception of tipping.

Older generations like baby boomers and Gen Xers have more negative attitudes about tipping. Bankrate found 72% of baby boomers and 62% of Gen Xers reported having at least one negative view on the matter. It was lower for younger generations — with 51% of millennials and 45% of Gen Zers reporting at least one negative take.

The survey found the percentage of people who always tip for services like a haircut, eating at a sit-down restaurant or taking a taxi ride increased slightly compared to 2023. However, each is down at least 7% compared to 2021.

The survey also found quality of service is still the biggest factor for most tippers. Sixty-four percent of people said the amount they tip is based on service. However, 10% said they always tip the same amount, regardless of service quality.

A big driving source behind the tipping burnout could be “tipflation,” the widespread expansion of gratuity to more industries. Customers are often prompted to leave a tip, even if they have had minimal or no contact with an actual person during the transaction.

About 34% of respondents to Bankrate’s survey said they were annoyed by pre-entered tip screens, and the survey found those screens can result in a smaller tip.

Just 14% of people said they tip more when given a pre-entered tip screen, while 25% of people said they tip less or not at all when given one. In fact, the survey found tipping for coffee shop baristas, furniture and appliance delivery workers, and takeout food workers is down from 2023.
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US credit card debt nearing 2008 record when adjusted for inflation

March 21, 2024
Credit card debt in the U.S. hit a record at the end of 2023 while high interest rates continue to push the debt balance even higher this year. The Federal Reserve recently reported U.S. credit card debt reached $1.13 trillion in the fourth quarter of 2023, up $143 billion from the year before. According to WalletHub, the total already topped $1.3 trillion by January.

“Context is important,” Bankrate Chief Financial Analyst Greg McBride said. “We’re at a higher level of population than we’ve ever been before. We’ve also seen tremendous inflation.”

When adjusted for inflation, WalletHub calculates total credit card debt is about 10% off its peak, which the country hit in 2008 during the Great Recession. But the CEO said growing balances this year could put the inflation-adjusted record in striking distance.

“We’ve had more people carrying larger balances for a longer period of time, at a time when credit card rates are at a record high,” McBride said. “And oh, by the way, delinquencies are the highest since 2012. So you put that all together, there’s no explaining that away that everything’s fine. Sixty percent of households are living paycheck to paycheck and clearly there everything is not fine.“

There’s typically a lot of shame around credit card debt, but credit card experts say that shame is often misguided.

“There’s definitely this idea that credit card debt is always the result of frivolous spending — you’re shopping, you’re going out, you’re buying stuff you shouldn’t buy that you don’t need,” NerdWallet credit cards expert Sara Rathner said. “The reality for a lot of people is credit cards are what are helping them make it from week to week.”

Higher prices, more debt

A NerdWallet survey revealed that 48% of Americans with revolving credit card debt are charging necessities, like food.

“What’s made this bout of inflation so insidious is that it’s hit hardest on necessities,” McBride said. “Shelter, food, energy costs — even things like automobile insurance.”

Since January 2021, the cost of living has been rising faster than the private sector’s average hourly wage, according to data by the Bureau of Labor Statistics and the Federal Reserve. At the same time, Americans’ personal savings are draining after COVID-19 peaks.

“If you don’t have much of a cushion of savings, you have no buffer between you and credit card debt the next time an unplanned expense arises,” McBride said.

For the second consecutive year, more than a third of Americans say they have more credit card debt than emergency savings. At 36%, Bankrate said it’s the highest percentage since they started asking this question in 2011. Gen Xers and millennials are driving the trend, which McBride said is not surprising.

“Those are the prime years of rising household expenses,” he said. “You’re buying houses, buying cars, raising a family, putting kids through college.”

Gen Z’s credit card debt is growing faster than any other generation. Credit Karma said the average debt balance went up nearly 23% from 2022 to 2023.

“I really feel for the younger generation now that’s just beginning to enter the workforce because it is very hard out there,” Rathner said. “Costs are up, wages are not up as much as costs and interest rates are really high.”

Higher interest rates, more debt

Bankrate reports that 49% of surveyed credit card users carry a balance month to month, up from 39% in 2021. In today’s interest rate environment, getting out from under that debt can seem insurmountable.

“It just becomes another bill that you pay every month,” Rathner said. “That’s really what it looks like for people who are in never-ending credit card debt.”

Take the current average credit card debt of $6,360, according to TransUnion. Without taking on any additional debt, if this person only makes minimum payments of around $174.90 a month, paying the average interest rate of around 21%, they’ll spend more than 25 years paying off the card. And they’ll pay more than $10,000 in interest alone. These calculations come from Bankrate’s minimum payment calculator.

Paying down debt

For those facing crippling credit card debt, experts say a great option to chip away at it is moving that debt to a balance transfer card with a zero-or-low-interest introductory rate. The problem is these cards are hard to come by if the person doesn’t have good or excellent credit.

“Look at contacting a nonprofit credit counseling agency who could really help you with things like budgeting, debt management, those types of things, get you pointed in the right direction,” McBride said.

“It might even mean declaring bankruptcy at some point if you really don’t see a way out of your debt,” Rathner said.

NerdWallet said about a third of Americans who carry a balance month to month believe they’ll be in credit card debt forever.

“Once you get into credit card debt, it is hard to get out,” Rathner said.
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