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These Are the Best U.S. Cities for Working Women in 2018

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

One could say today’s American woman is a working woman. In 2016, 57% of women participated in the workforce, up from 43.3% in 1970. Additionally, 42% of mothers were the primary breadwinners for their families, meaning they brought in at least half of their family’s earnings, according to a 2015 report from the Center for American Progress.

Although more women are in the workforce and supporting their families, women’s earnings have historically lagged against that of men. In 1987, the average working woman earned about 70% of a man’s income. In 2016, the gap narrowed, with women earning 82% of the average man’s earnings. But broad research doesn’t always paint the clearest picture. For example, more detailed wage gap analyses have found the wage gap is much worse among minority women, while the gap is slightly better for today’s younger women.

Despite these advances, women in the aggregate earn less money, cover more child care costs, hold fewer leadership positions and suffer more in earnings and work penalties related to maternity and parenthood than men do. Factors like median earnings and women in leadership contribute to a woman’s ability to progress in her earnings and career throughout her life.

With these factors in mind, MagnifyMoney analyzed and ranked the largest 50 U.S. metros to determine where the average working woman might have the best shot at equal pay and advancement in the workplace.

How we chose the best cities for working women

To see where working women seem to fare better, we took the 50 biggest metros in America and graded them based on the following factors:

  • The rate of women who are unemployed.
  • The rate of businesses with employees that are owned, either equally or entirely, by women.
  • The rate of people in management occupations who are women.
  • The percentage gap between median earnings for women and men (i.e. the wage gap).
  • The rate of women between the ages of 18 and 64 who have employer-based health insurance.
  • The percentage of median income required to pay for day care, because access to child care is essential for the ability to work outside of the home.
  • The percentage of the state’s legislature (or the District Council, in the case of Washington, D.C.) who are women.
  • The protections offered by states to pregnant women and working parents, such as state-funded paid parental leave, protection for taking off time to attend school events and mandated accommodations for pregnant women.

Key findings:

Washington, D.C., is the best metro for working women.
The nation’s capital earned the top spot in our ranking, with a final score of 72.8. It has a relatively narrow wage gap compared with the nation as a whole (15.4% vs. 20.4%), one-third of the district’s legislators are women and it ranked highest out of all 50 metros for the rate of women (43.6%) who hold management occupations in the workforce.

Detroit is the worst metro for working women.
Detroit scored a 33.9 on our index, indicating the metro isn’t the best place for a working woman’s earnings and career advancement. At 25.4%, Detroit ranks in 46th place in the rate of businesses owned by women and 46th place in the gender wage gap rankings. Detroit women earn at least 25% less than men on the dollar. However, the metro’s 6% unemployment rate for women is among the highest in our survey.

L.A. has the lowest wage gap. Los Angeles has the lowest wage gap of all 50 metros, at 10.1%. That’s compared to an average of 19.0% across all 50 metros. It’s followed by Tampa, Fla. (10.6%); Miami (12.7%); Denver (12.8%); and San Antonio (13.7%).

Seattle has the highest share of women-owned businesses, at 39.8%. It was followed behind by Phoenix (38.4%); Portland, Ore. (37.3%); Miami (36.2%) and Riverside, Calif. (35.4%). Across all 50 metros we studied, we found an average of just 31.2% of businesses are owned by women.

More women in management occupations may bode well for gender wage gaps.
Generally speaking, we found a metro’s earnings gap was narrower in metros with a relatively high number of women in management occupations. A good example of this phenomenon can be seen in our number one ranked city, Washington, D.C. We found 43.6% of managers in Washington are women, ranking it No. 1 in that category. And it scored the 10th lowest wage gap out of the 50 metros analyzed. Likewise, Sacramento (ranked No. 3 overall) had the 3rd highest proportion of women who are in management occupations, and the 7th lowest earnings gap, we found. Denver bucks the trend, however. It was among the worst ranking cities for women in management occupations (39 out of 50), but had the 4th smallest gender wage gap.

More than half of the states had no parental or pregnancy protections in place. We scored features like whether or not there was a law in place, the length of coverage the law allowed, if the law was limited by the size of the employer and if women had to jump through hoops like bring a doctor’s note to gain access to pregnancy protections. In addition to the four states that currently offer workers paid family leave, both Washington state and the District of Columbia enacted paid parental leave coverage in 2017, which will go into effect in 2020. Washington, D.C., will provide eight weeks of parental coverage and Washington state will offer 12, with up to an additional six weeks for a serious maternal health condition. New York state will also increase the length of their paid leave from the current eight weeks now, to 10 weeks in 2019, and 12 weeks in 2021.

California has the best parental and pregnancy protections. After evaluating all 50 largest metro areas, none of them scored a perfect 100, but California scored the highest at 57.

Download the complete findings here.

The 10 best U.S. metros for working women

(All metros were given a score out of 100)

1 — Washington, D.C.

Score: 72.8

The nation’s capital earned the top spot in the Best Cities for Working Women ranking, with a final score of 72.8. The capital ranks first out of all 50 cities when it comes to the percentage of managers who are women, with 43.6% of its management occupations filled by women.

What the Federal City does well

Overall, women earn about 15.4% less than men on the dollar, making the Federal City the 10th best in our wage gap rankings.

Health care for women in D.C. is comparatively better than in the majority of other major U.S. cities, too. Nearly seven in 10 women have employer-based health insurance — placing it 5th in that category overall — and the metro’s pregnancy and parental workplace protections earned it a score of 30. Overall, D.C. ranks 10th in pregnancy and parental workplace protections.

The district ranked 3rd in earnings for child care when compared with the other metro areas, as it takes one-fifth of a woman’s median earnings to cover day care costs.

D.C. ranks 24th overall in percentage of women who are unemployed. The Census Bureau’s 2016 American Community Survey reports a 4.9% unemployment rate for women in the District of Columbia, significantly lower than the national 2016 rate for all U.S. women, 6.7%.

Where D.C. could use some improvement

Those strong characteristics make D.C. the best city overall for the working woman, but the city has a shortfall. D.C. lands in the middle of the rankings in women-owned businesses at No. 24. Women own about 32.4% of businesses in the nation’s capital.

2 — Minneapolis

Score: 66.4

With an overall score of 66.4, the larger of the twin cities, Minneapolis, is the second-best metro area in the nation for working women.

What Minneapolis does well

The city’s health care climate for women and its unemployment rate helped pushed it to the top of our rankings. It also benefited from the fact that the state of Minnesota has a high rate of women legislators. Nearly one-third (32.8%) of state legislators are women.

Good news for the working woman who considers having children one day: Minneapolis placed 11th overall based on state legislation in place for parental and pregnancy protection. Falling just behind D.C., it earned a parental and pregnancy workplace protection score of 29. If a woman has a day care-aged child, it would take about 23.1% of her median earnings to pay for day care in Minneapolis (No. 29).

The Mill City also has the lowest unemployment figures for women. With 2.9% of women unemployed, Minneapolis ties with Buffalo, N.Y., for lowest unemployment among all cities in the analysis.

Where Minneapolis could use some improvement

The City of Lakes generally ranks in the middle for women in business leadership, as 31.5% of women own businesses (No. 28) and 40.8% of its managers are women (No. 17). Possibly a reflection of fewer women in leadership, Minneapolis has a 19.7% gender wage gap, placing it 31st out of the 50 metro areas in that particular category.

3 — Sacramento, Calif.

Score: 66.2

California currently has the best coverage laws for mothers and pregnant women, boosting the Sacramento, Calif., metro area up on our list to No. 3 overall.

What Sacramento does well

The city’s parental and pregnancy workplace protections earned it a score of 57 according to MagnifyMoney’s index, the best of all cities in the data set. No state had a program that scored a perfect 100. The city falls in the middle of the pack when it comes to day care costs. Women in Sacramento would need to spend about 22.2% of their median earnings to put children in day care so they can get to work.

The City of Trees ranked third in the percentage of managers who are women (43.4%) and 11th overall in the percentage of women-owned businesses. Generally on track with people in management occupations, the median earnings gender wage gap in Sacramento is 14.6%.

The unemployment rate for women in Sacramento is 5.7%, according to 2016 five-year ACS estimates. That’s an entire point lower than the nation’s 6.7% unemployment rate for women.

Where Sacramento could use some improvement

Sacramento lands in the middle of the index — No. 24 — in its rate of women legislators, 22.5% of whom are women.

The city landed on the lower end of the spectrum for the percentage of women with employer-provided health insurance. About 61.4% of women in Sacramento obtain health insurance through their workplace (No. 34), which is slightly less than the group average of 63.1%.

4 — Denver

Score: 65.8

What Denver does well

The city boasts the 4th lowest gender wage gap at 12.8%. That’s significantly lower than not just the national average (20.4%) but across the 50 metros we analyzed (19%).

Nearly 40% of state legislators in Colorado are women, helping boost Denver to No. 2 in that category. Denver ranks 10th for women-owned businesses, as about 35% of businesses are owned by women.

The unemployment rate for women in Denver is a low 3.6%, according to 2016 five-year ACS estimates, placing it third in the category’s rankings. The city lands in the center of the category’s rankings (24th out of 50) for the percentage of women with employer-based health insurance. Just under two-thirds (64.7%) of women in Denver have health insurance through an employer.

Denver isn’t a bad city for a working woman with children, compared with other metro areas in our data set. The city ranks 12th on our scale for parental and pregnancy protections.

Where Denver could use some improvement

On the flip side, 39% of managers in Denver are women, pushing it to 39th place in that category. Ironically, since wage gaps tend to narrow with a rise in women in management occupations, Denver has one of the lowest wage gaps. It ranks 37th when it comes to how much of a woman’s median earnings is required to afford day care at 24.4%.

5 — San Francisco, Calif.

Score: 62.6

What San Fran does well

As noted earlier when we discussed Sacramento, California is the best state for parental and pregnancy workplace protections. The state scored a 57 in that category — the highest among all metros in our analysis — out of a possible 100.

San Francisco benefited from that high score, ranking 12th in the rate of the city’s businesses owned by women (34.3%) and 8th in the percentage of managers who are women (41.8%).

San Francisco also has a relatively low unemployment rate for women compared with the other metros in the analysis, at 4.4%, landing it 12th place in that category.

Where San Fran could use improvement

Once children are of day care age, it would take about 25.1% of a woman’s median salary to afford day care in the metro area. That’s considerably higher than the 50-metro average of 23%.

San Francisco may be among the top 10 when it comes to having women in management occupations, but that doesn’t translate into a narrower median earnings gender gap. The wage gap is in the middle of our pack in the analysis, landing it 21st out of 50 metro areas. Women in the area earn about 18.7% less than men, worse than the national wage gap of 20.4%.

6 — Seattle

Score: 62.1

What the Emerald City does well

Seattle is home the highest percentage of businesses owned by women of all the cities in our data set. Close to 40% of businesses in Seattle are equally or fully owned by women. Additionally, only 4.2% of women in Seattle are unemployed, placing it 8th among all metros in the category’s rankings.

The metro also benefits from Washington state’s comparatively high rate of women legislators — 37.4% — which is good enough to place it third overall in the category.

What could use improvement

The city ranks 19th for women in management with 40.7% of women in management occupations, and has one of the highest gender wage gaps in our analysis (ranked 44th) at 23.6%.

About 67% of women in Seattle get health insurance through an employer (15th overall). The city scored 18 in parental and pregnancy workplace protection, placing it in 16th place in the category overall. It takes nearly a quarter (24.8%) of women’s median earnings to pay for day care in Seattle, 38th in the category’s rankings.

7 — Baltimore

Score: 60.8

What Baltimore does well

The city scored strongly in its rate of women with employer-based health insurance, the rate of women in management positions and benefits from Maryland’s relatively high rate of female state legislators.

Most working women in Baltimore — about 68.2% — are on an employer-based health insurance plan. The comparatively high percentage of women on employer-based health plans places Baltimore 8th overall in the analysis of U.S. metros.

More than 42% of managers in Baltimore are women, placing the city in 7th place overall among the cities in our analysis.

The gender wage gap in Baltimore is slightly worse than the national average but slightly better than the average gap found among the 50 metros we analyzed. Compared with the national wage gap of about 20.4%, women in Baltimore earn 18.8% less than men in the metro area. Among all 50 metros, the wage gap was 19%.

Child care is slightly more affordable. It would take about 21% of a woman’s median earnings to pay for day care in the Baltimore metro area, compared with a 50-metro average of 23%. About 32% of Maryland’s state legislators are women, helping boost the Baltimore metro area to 11th overall in that category.

What needs improvement in Charm City

However, Baltimore ranked 19th among other metros in the quality of its parental and pregnancy workplace laws on the books. The city scored a 12 in the category compared with an average of 15 across all 50 metros.

About 30.8% of businesses in Baltimore are owned by women, lower than the 50-metro average of 31.2%.

8 — Providence, R.I.

Score 58.2

What Providence does well

A good portion of management occupations in Providence are filled by women. The city is ranked fifth among the other metro areas in our analysis, with 42.8% of managers who are women. The state of Rhode Island has a good percentage of women in state legislature, which helped boost Providence’s score. It ranks 12th in the category, with about 31% of state legislators who are women.

Providence also ranks in the top 10 for its legal protections for expectant parents and those with day care-aged children. The metro was ranked 9th out of 50 metros with a score of 40 in parental and pregnancy workplace protections.

What could use improvement in Providence

Day care doesn’t come cheap. Providence has the 10th highest day care cost among metros. It costs a little more than a quarter of a woman’s median earnings to afford day care in Providence.

The metro falls in the middle of the pack when it comes to the rate of businesses owned by women. It ranked 29th place out of 50 with 30.8%, slightly lower than the metro average of 31.2%.

Providence’s gender wage gap also needs work. The metro is ranked 33rd when compared with other areas in our analysis as women earn 19.9% less than their male counterparts.

9 — St. Louis

Score: 56.6

What St. Louis does well

Almost a third of Missouri’s state lawmakers are women, pushing St. Louis to 8th place in this category, and 35.2% of businesses are owned, either fully or equally, by women, which is the 6th highest among the 50 metros. The unemployment rate for women in 2016 was also relatively low at 4.4% (12th lowest), which may have something to do with the high rate of employer-based insurance for women. St. Louis has the 10th highest rate of women with workplace insurance at about 68%.

St. Louis also does pretty well relative to other cities in day care costs, requiring 21.7% of the median earnings for women to pay the average costs. St. Louis is in middle of the pack when it comes to the number of women in management occupations (40.4%), ranking 23rd of the cities we reviewed.

Where St. Louis could use some improvements

Unfortunately, that good showing of women in leadership positions doesn’t translate to more equitable earnings for women. Median income for women was 22.5% lower than for men in 2016, and only six other metros in the data set has a larger wage gap. The state of Missouri scored a zero on our parental and pregnancy workplace protection index.

10 — Kansas City, Mo.

Score: 56.5

What Kansas City does well

The city’s ranking is largely helped by Missouri’s high rate of women in state legislature. In Missouri, nearly one in three members — 32.8% — of the state’s legislators are women.

About one-third (33.2%) of businesses in the metro area are owned by women, which is slightly better than other metros analyzed, which had an average of 31.2%.

The unemployment rate for women in Kansas City is lower compared with other metro areas in the data set. With an unemployment rate of 4.3%, the city ranks 10th in the rate of women who are unemployed.

Kansas City also has a decent rate of managers who are women. The metro area ranks 17th out of 50 for the percentage of managers who are women. About 40.8% of managers in Kansas City are women, right on par with a 40.2% average for all 50 metros.

Where Kansas City could use improvements

Kansas City is one of many cities that scored zero in parental and pregnancy workplace protections on the books in our analysis, thanks to a complete lack of state laws that provide these specific kinds of coverage.

Like in Seattle, ownership and workplace leadership do not seem to translate into higher wages for women in Kansas City, Mo.

The city ranks 43rd with a median earnings gender gap of 21.7%, higher than both the 50-metro average of 19% and national average of 20.4%.

The worst metros for working women

Ranking

Metro

Final score

50

Detroit

33.9

49

Memphis, Tenn.

34.2

48

Oklahoma City

34.3

47

Charlotte, N.C.

34.4

46

Birmingham, Ala.

35.3

45

Cleveland

38.2

44

Miami

38.9

43

Houston

39.2

42

Pittsburgh

39.5

41

Salt Lake City

39.9

Methodology:

Each of the 50 largest metropolitan statistical areas (“MSAs”) was ranked against each other, on a scale 100, on eight factors relevant to women’s ability to achieve financial and professional success in the workplace.

Each MSAs scaled result was derived from the following formula for each, individual factor: 1 x 100, and rounded to one decimal point).

The results for each factor were then added together, and the sum was divided by eight (rounded to one decimal point), for the highest possible score of 100 and the lowest possible score of 0. The actual highest score was 72.8 and the lowest 33.9.

The eight factors are:

  • Employment. The percent of women who are unemployed, as reported in the American Community Survey 2016 (five-year estimate) from the U.S. Census Bureau (“2016 ACS”).
  • Health care. The percent of women between the ages of 18 and 64 (inclusive) who have employer-based health insurance, as reported by 2016 ACS.
  • Business ownership. Percent of businesses with employees that are owned, either wholly or equally, by women, derived from the 2015 Annual Survey of Entrepreneurs from the U.S. Census Bureau.
  • Management positions. Percent of people in management occupations who are women, derived from 2016 ACS.
  • Wage gap. Gap, as a percent, between median earnings of men and women, derived from 2016 ACS.
  • Child care. The average cost of in-center child care, as a percent of median earnings for women. Day care costs were reported in “The Care Index” from New America and Care.com, and median earnings were reported by 2016 ACS.
  • Representation. The percent of elected state (or district) legislators who are women, as reported by the Center for American Women and Politics at Rutgers University’s Eagleton Institute of Politics, Council of District of Columbia, and the Tennessee General Assembly legislator web pages. Since we’re working on the MSA level, which can cover multiple municipalities and counties, we opted to review women’s representation at the state level.
  • Workplace protections. State pregnancy and parental workplace protections were scored on the following bases. The highest possible score was 100 points and the lowest was zero. The highest actual score was 57 and the lowest actual score was zero.
    • Paid leave: the number of paid parental leave weeks covered by the state, divided by a maximum of 12 weeks, up to 50 points.
    • Pregnancy accommodation protections: each MSA was granted six points, for a possible total of 30 points, for the following:
      • the existence of such a law, 2) if the law covers both public and private employees,
      • if the covers all employers, regardless of size,
      • if the law doesn’t allow employers to require medical documentation for accommodations (three points were awarded if employers could not ask for documentation for some, but not all accommodations, such as bathroom and water breaks),
      • if the law doesn’t allow for an “undue hardship” exemption for employers (three points were awarded if the undue hardship exemption could not be applied to certain accommodations, such as bathroom and water breaks).
    • Allowable time off to attend school events: the number of hours spent at a child’s school, per year, for which a parent cannot be fired, divided by a maximum of 40 hours, up to 20 points.

For the sake of clarity, each metro name is the first city and state listed in the MSA title, which we understand to be the most populous component of each MSA. The Care Index (child care costs) refers Norfolk, Va., which we associate with the Virginia Beach MSA.

References:

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Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

Kali McFadden
Kali McFadden |

Kali McFadden is a writer at MagnifyMoney. You can email Kali at kali.mcfadden@magnifymoney.com

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MoviePass, AMC, Cinemark, Sinemia — Which Theater Subscription Is Best?

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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MoviePass is facing stiff competition as several theater chains and startups have launched their own rival theater subscription services. There’s AMC Entertainment’s AMC Stubs A-List, launched in June, Cinemark’s Movie Club, which hit the scene at the end of 2017, and Sinemia, a startup founded in 2014.

All three competitors seem in their own way to directly target the biggest consumer gripes about using MoviePass — the inability to book tickets in advance, see multiple films in one day and see the same flick more than once.

To its credit, MoviePass isn’t going down without a fight. It already made a dramatic pricing change, slashing its monthly fee from $39.99 at its highest to $9.95 per month, attracting millions of new subscribers in the process. The number of MoviePass subscribers reportedly surged from about 20,000 in early 2017 to 3 million as of June 2018. Earlier this year, it reportedly sued Sinemia for patent infringement. And it recently diversified its offerings with a lower-priced subscription plan.

For consumers, competition is almost always a good thing. Companies are forced to make their services more appealing in hopes of attracting new customers.

In this post, we will go over the benefits and limits of the four monthly movie subscription packages to help you choose the one that best fits your needs.

MoviePass vs. AMC vs. Cinemark vs. Sinemia

Fees and fine print

AMC Stubs A-List



MoviePass



Sinemia



Cinemark Movie Club



COST


$19.95/month + tax

$7.95/month or $9.95/month depending on the plan

$4.99 to $14.99 per month for individual plans; $8.99 to $89.99 for family plans.

$8.99/mo

MOVIE LIMITS


See up to 3 movies per week

1 movie per day or 3 movies per month, depending on the plan.

See up to 1, 2 or 3 movies per month, depending on the plan.

1 movie per month

THEATER ACCESS


600+ AMC theatres

5,200+ theaters

4,000+ theaters

339 Cinemark theaters

CANCELLATION POLICY


You can’t cancel your subscription during the initial three months of membership. After the three-month commitment, you can cancel anytime and your benefits last until the end of the current billing period.

If you cancel your subscription, you won’t be able to re-enroll or start a new subscription for 9 months. Your account will be active until the last day of your current billing cycle.

You can cancel anytime but Sinemia won’t refund you the upfront annual fee. However, you’ll be able to use your membership until the last day of your plan.

You can cancel any time you want and won’t have to wait for a period of time to reactivate your membership after cancellation. Your benefits are effective until the last day of the current billing cycle.

FINE PRINT


May charge surcharge when movies are in high demand

The monthly fee is actually charged upfront for the entire year.

Though there are many limitations with MoviePass, like the one-movie-per-day or one-visit-per movie rule, it’s got one of the most competitive prices. Cinemark might look more appealing at $8.99/mo, but you can only see one film per month and you’re limited to Cinemark theaters. By comparison, MoviePass’ lowest price plan charges $7.95 for three movies per month at a wide variety of theaters.

AMC’s fee may seem steep, but it offers more flexibility, such as advance ticket-booking, repeated visits to the same movie and seeing more than one movie on any given day.

If you are not a frequent moviegoer, Sinemia’s classic plan — one 2D movie per month — is by far the least expensive plan, starting at $4.99/mo. But read the fine print. The service charges its fees upfront, meaning you could be on the hook for anywhere from to $59.88 to $179.88 right off the bat, depending on which plan you choose. And if you cancel your subscription before the year is up, they won’t refund you the upfront fee.

Hidden costs

MoviePass recently introduced peaktime pricing, meaning users will have to pay a surcharge fee — on top of their monthly subscription — for high-demand movies, depending on the specific title, date, or time of day. In order to avoid the additional cost, price-sensitive users will need to pick showtimes and locations accordingly.

Variety of plans

AMC and Cinemark are simple with just single plan options. MoviePass has two plan options. Sinemia has the most complex offerings, with four different plans to choose from:

Classic (2D movies only)

  • $4.99 (1 movie per month)
  • $6.99 (2 movies per month)

Elite (all movie formats)

  • $9.99 (2 movies per month)
  • $14.99 (3 movies per month)

Available formats

AMC Stubs A-List


MoviePass


Sinemia


Cinemark Movie Club


All formats, including 2D, Dolby Cinema at AMC, IMAX and RealD 3D


2-D movies only


Varies by plan.


2-D movies only


If you want premium movie formats, go for AMC Stubs A-List or Sinemia’s Elite packages. MoviePass and Cinemark Movie Club members can only see 2-D movies. However, with Cinemark Movie Club, you have a choice to see premium movies, such as IMAX, with some additional fees.

Book tickets in advance?

AMC Stubs A-List



MoviePass



Sinemia



Cinemark Movie Club



Yes. You can make a reservation through the AMC website or mobile app.


No. You can only reserve a same-day ticket if the app indicates e-ticketing is available in a particular theater. Otherwise, you have to book in person. A physical card is needed for ticket purchasing in most cases unless the theater supports e-ticketing.


Yes. You can book your tickets online up to 30 days in advance through the app.

You can also order a physical card separately, which allows you to purchase tickets on the spot at the theater in a MoviePass fashion.


Yes. Tickets can be purchased via the Cinemark app, online, or at the box office.


MoviePass might require the most hassle to reserve a ticket. First, you need to sign up for a MoviePass account online or through its mobile app. Then you have to wait for a physical MoviePass card to arrive in the mail to activate your account. MoviePass users must physically show up at theaters to buy same-day tickets with the card (unless the theater supports e-ticketing, in which case you don’t need the card) and, they have to verify the purchase each time they use MoviePass by taking a photo of the ticket stub and submitting it through the app. You can follow our step-by-step guide to use MoviePass correctly and effectively to avoid unwanted frustration.

With other services, a membership card isn’t necessarily needed for purchase tickets. Members can make a reservation in advance through the services’ websites or mobile apps or at the theater box office.

Can multiple users share a subscription?

AMC Stubs A-List



MoviePass



Sinemia



Cinemark Movie Club



No


No


Yes


Yes*


Most of these services don’t let friends or family share subscriptions — the exception is Sinemia. It features a wide selection of family plans for two to six people, charging from $8.99/month (one movie day for two people) to $89.99/month (three movie days for six people).

*Cinemark allows Movie Club members to pay $8.99 for an additional ticket at checkout. Theoretically, it could be a $17.98 monthly subscription for two.

Other perks

AMC Stubs A-List




MoviePass



Sinemia



Cinemark Movie Club



-Members receive the AMC Stubs Premiere benefits for free (worth $15/year+tax).
-Members can earn AMC Stubs points on the monthly membership charge:100 points on per $1 spent.


You can refer up to three friends who, upon sign-up, will get their first month of MoviePass for free.


You can get $5 for referring each friend to Sinemia. Your friend also gets the same credit reward.


-Members can receive 20% off on concession purchases.
-New subscribers can get a free Android smartphone (as of July 10) if they pay $100 for 2 months of wireless services.
-Members can earn Cinemark Concessions points.


While it’s unclear which Android phone comes with a Cinemark Movie Club membership and an additional $100 for two months of wireless services, for those who need a smartphone, the deal just comes in time.

Which subscription service is best for me?

Who MoviePass is best for

If you are a flexible, frequent moviegoer who does not mind avoiding peak time to see movies and feel comfortable going through the multiple steps to purchasing tickets, MoviePass is a more cost-effective deal for you. In many parts of the country, such as New York, where a movie ticket easily costs more than $15, you could get your subscription value back by seeing just one movie each month. If you have a taste for indie, low-budget movies, or you simply don’t frequent AMC or Cinemark theaters, you should also stick with MoviePass.

Steer clear of MoviePass if you live in a densely populated area where movies may sell out quickly. You may find it difficult to get to the theater and reserve a seat the same day.

And keep in mind MoviePass will block you from reactivating your plan or signing up for a new subscription after cancellation.

Check participating MoviePass theaters here.

Who AMC Stubs A-List is best for

Mainstream movie viewers who prefer to lock in tickets in advance — especially tickets to premieres of big releases — or have a particular liking for premium movie formats, such as 3D, may want to pay extra for the better service terms with AMC. You could also get discounts on beverages or popcorn at the concession stand. Just make sure you live in reasonable distance of an AMC theater.

Check participating AMC theaters here.

Keep in mind AMC Stubs A-List requires a minimum three-month subscription from its members, during which they cannot cancel their membership.

Who Sinemia is best for

If you only go to the movie theater once or twice a month and are willing to commit to paying an entire year’s subscription up front, consider Sinemia, whose multi-layer pricing structure could satisfy people with different entertainment needs. For families, couples and friends who would like to see movies together, a Sinemia’s family package could also be a worthwhile investment.

See participating Sinemia theaters here.

Keep in mind Sinemia, which charges members a lump sum subscription fee once a year, won’t refund you if you cancel your membership.

Who Cinemark Movie Club is best for

If you are someone who lives in a place where a movie ticket costs more than $9 and you do not like to commit to seeing a certain number of movies each month. Cinemark Movie Club allows unused credits to be rolled over. If monthly credits are used up, subscribers can also buy two additional tickets per transaction for $8.99 each. Basically, it’s an indirect way to sell a movie ticket for $8.99 that comes with some conditions. And if you happen to need a smartphone, its current sign-up deal is a steal.

Is MoviePass here to stay?

The finances of MoviePass have recently been called into question. Industry experts have suspected that the company can’t stay afloat with its unprofitable business model. MoviePass buys full-price tickets from theaters and offers them to subscribers.

In May, the company’s majority owner, Helios and Matheson Analytics, reported more than $26 million in net profit losses during the first quarter of 2018.

Helios and Matheson Analytics’ stock traded at $0.12 per share on July, 17, a nearly 52-week low, down almost 100% from last October’s peak of $38.86.

While MoviePass projects its subscribers to surpass 5 million by August, some analysts have predicted in media interviews that the company has a high likelihood of bankruptcy.

If MoviePass eventually proves to be too good to be true, current users should enjoy the deal while it lasts. At least alternatives are now available.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Credit Cards, Featured, News

Average Credit Card Debt in the U.S. in 2018

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Even as household income and employment rates are ticking up in the U.S., credit card balances are at all-time highs. And as the Fed raises rates, credit card rates rise in tandem, meaning consumers could pay billions in extra interest charges.

We’ve updated our statistics on credit card debt in America to illustrate how much consumers are now taking on.

  • Americans paid banks $104 billion in credit card interest and fees in 2018, up 11% from the prior year, and up 35% over the last five years, as Fed rate increases have been passed on to consumers. MagnifyMoney analyzed FDIC data through March, 2018 for each bank whose deposits are insured by the FDIC.
  • With potentially four Fed rate hikes left to come this year, we estimate the increase in interest and fees paid in the coming year will once again be above 10%, putting Americans on track to pay over $110 billion. Our analysis of the impact of Fed rate hikes found credit card rates are the most sensitive to Fed rate hikes, rising more than twice as fast as mortgage rates.
  • Average APRs on credit card accounts assessed interest are now 15.5%, up nearly 300 basis points in five years, according to the Federal Reserve.

  • Total revolving credit balances are $1.04 trillion as of May, 2018. The figure, reported monthly by the Federal Reserve, is the total amount of revolving credit balances reported by financial institutions, the overwhelming majority of which are credit and retail card balances, according to the CFPB. As of March 2018, non- card-related revolving balances such as overdraft lines of credit were approximately $73 billion according to our analysis of the FDIC data used by the Federal Reserve to calculate total revolving balances.

  • Americans carry $687 billion in credit card debt that is not paid in full each month. This estimate includes people paying interest, as well as those carrying a balance on a card with a 0% intro rate. We based the estimate on a CFPB study of credit card account data that found 29% of total credit card balances are paid off each month, implying 71% of credit card balances revolve each month. We applied the percentage to the Federal Reserve’s revolving credit balance data less $72 billion in non-credit card revolving debt to reach $687 billion in credit card balances carried over month to month.
  • 44% of credit card accounts aren’t paid in full each month, according to the American Bankers Association. Those that don’t pay in full tend to have higher balances, which is why the percentage of balances not paid in full (71%) is higher than the percentage of accounts not paid in full (44%).
  • The average credit card balance is $6,348 for individuals with a credit card, according to Experian. This excludes store credit cards, which have an average balance of $1,841. Both figures include the statement balances of individuals who pay their balance in full each month.

Credit card use

  • Number of Americans who actively use credit cards: 175 million as of 2018, according to Transunion
  • Average number of credit cards per consumer: 3.1, according to Experian. That doesn’t include an average of 2.5 retail credit cards.
  • Number of Americans who carry credit card debt month to month: 70 million.

Credit card debt

The following estimates only include the credit card balances of those who carry credit card debt from month to month — they exclude balances of those who pay in full each month.

  • Total credit card debt in the U.S. (not paid in full each month): $687 billion
  • Average APR: 15.54% (also excludes those with a 0% promotional rate for a balance transfer or purchases)
    • This estimate comes from the Federal Reserve’s monthly reporting of APRs on accounts assessed interest by banks.

Credit card balances

The following figures include the credit card statement balances of all credit card users, including those who pay their bill in full each month.

  • Total credit card balances: nearly $1.04 trillion as of May 2018, an increase of 5% percent from the previous year. This includes credit and retail cards, and a small amount of overdraft line of credit balances.
  • Average credit card balance: $6,358, according to Experian (excludes retail credit cards, which have lower balances. The average consumer has $1,841 in balances on retail cards and we estimate combining all consumers with retail or credit card debt the average is approximately $5,000 per individual). All averages include those who pay their bill in full each month.

Who pays off their credit card bills?

According to the American Bankers Association, as of the end of 2017, accounts that are paid in full versus carrying debt month to month comprise the following mix of open credit card accounts:

  • Revolvers (carry debt month to month): 44 percent of credit card accounts
  • Transactors (use card, but pay in full): 29.5 percent of credit card accounts
  • Dormant (have a card, but don’t use it actively): 26.5 percent of credit card accounts

Delinquency rates

Credit card debt becomes delinquent when a bank reports a missed payment to the major credit reporting bureaus. Banks typically don’t report a missed payment until a person is at least 30 days late in paying. When a consumer doesn’t pay for at least 90 days, the credit card balance becomes seriously delinquent. Banks are very likely to take a total loss on seriously delinquent balances.

Delinquency rates peaked in 2009 at nearly 7%, but in 2018 they have remained below 3%. 

Debt burden by income

Those with the highest credit card debts aren’t necessarily the most financially insecure. According to the 2016 Survey of Consumer Finances, the top 10 percent of income earners who carried credit card debt had nearly twice as much debt as average.

However, people with lower incomes have more burdensome credit card debt loads. Consumers in the lowest earning quintile had an average credit card debt of $2,100. However, their debt-to-income ratio was 13.9 percent. On the high end, earners in the top decile had an average of $12,500 in credit card debt. But debt-to-income ratio was just 4.8 percent.

Income Percentile

Median Income

Average CC Debt

CC Debt: Income Ratio

0%-20%

$15,100

$2,100

13.9%

20%-40%

$31,400

$3,800

12.1%

40%-60%

$52,700

$4,400

8.3%

60%-80%

$86,100

$6,800

7.9%

80%-90%

$136,000

$8,700

6.4%

90%-100%

$260,200

$12,500

4.8%

 

Although high-income earners have more manageable credit card debt loads on average, they aren’t taking steps to pay off the debt faster than lower income debt carriers. In fact, high-income earners are as likely to pay the minimum as those with below average incomes. If an economic recession leads to job losses at all wage levels, we could see high levels of credit card debt in default.

Generational differences in credit card use

In 2017, Generation X surpassed the baby boomer generation to have the highest credit card balances. Experian estimates that on average, Generation X has a balance of $7,750 per person, 21.94% more than the national average ($6,354). Boomers carry nearly as much as Generation X with an average balance of $7,550.

At the other end of the spectrum, millennials, who are often characterized as frivolous spenders and are too quick to take on debt, have nearly the lowest credit card balances. Their median balance clocks in at $4,315. The youngest generation, Gen Z, has the smallest average balance of $2,047 per person.34

How does your state compare?

Using data from the Federal Reserve Bank of New York Consumer Credit Panel and Equifax, you can compare median credit card balances and credit card delinquency.

State

Credit Card Debt Per Debtor

Credit Card Debt Per House

Alabama

$3,710.56

$7,198.48

Alaska

$5,879.85

$11,406.91

Arizona

$4,299.70

$8,341.42

Arkansas

$3,289.01

$6,380.69

California

$4,569.51

$8,864.85

Colorado

$4,898.56

$9,503.20

Connecticut

$5,171.89

$10,033.47

Delaware

$4,338.88

$8,417.42

Florida

$4,318.35

$8,377.59

Georgia

$4,727.46

$9,171.27

Hawaii

$5,330.46

$10,341.09

Idaho

$3,791.84

$7,356.18

Illinois

$4,412.71

$8,560.65

Indiana

$3,624.05

$7,030.65

Iowa

$3,169.16

$6,148.17

Kansas

$3,854.05

$7,476.85

Kentucky

$3,457.67

$6,707.88

Louisiana

$3,767.91

$7,309.75

Maine

$3,905.56

$7,576.78

Maryland

$5,287.61

$10,257.96

Massachusetts

$4,720.53

$9,157.83

Michigan

$3,458.51

$6,709.51

Minnesota

$4,257.26

$8,259.08

Mississippi

$3,204.95

$6,217.60

Missouri

$3,763.46

$7,301.11

Montana

$3,732.83

$7,241.69

Nebraska

$3,594.46

$6,973.25

Nevada

$4,263.19

$8,270.59

New Hampshire

$4,943.44

$9,590.27

New Jersey

$5,361.06

$10,400.47

New Mexico

$4,185.93

$8,120.71

New York

$4,969.84

$9,641.50

North Carolina

$4,124.04

$8,000.63

North Dakota

$3,756.19

$7,287.00

Ohio

$3,738.95

$7,253.56

Oklahoma

$4,038.90

$7,835.47

Oregon

$3,881.17

$7,529.48

Pennsylvania

$4,209.21

$8,165.86

Rhode Island

$4,376.34

$8,490.10

South Carolina

$4,187.65

$8,124.04

South Dakota

$3,608.28

$7,000.07

Tennessee

$3,903.24

$7,572.28

Texas

$4,937.00

$9,577.78

Utah

$3,775.21

$7,323.92

Vermont

$4,199.77

$8,147.56

Virginia

$5,404.32

$10,484.38

Washington

$4,568.09

$8,862.09

West Virginia

$3,381.36

$6,559.84

Wisconsin

$3,410.29

$6,615.96

Wyoming

$3,944.72

$7,652.76

 

State

Silent

Boomers

Gen X

Millennials

Gen Z

Alaska

$5,456

$9,495

$8,995

$4,464


$1,518


Alabama

$3,511

$6,461

$6,485


$3,324


$1,455




Arkansas

$3,194

$5,995

$6,197


$3,240


$1,803


Arizona

$4,149

$6,967

$6,778


$3,575


$1,555


California

$4,232

$7,050

$6,578


$3,654


$1,596


Colorado

$4,004

$7,499

$7,439


$3,833



$1,514


Connecticut

$4,091

$8,179

$8,046


$3,716



$2,567


Dist. of Columbia

$5,486

$7,976

$7,393


$4,596



$2,814


Delaware

$4,147

$7,128

$7,144


$3,285



$1,608


Florida

$4,311

$7,047

$6,615


$3,639



$1,837


Georgia

$4,356

$7,517

$6,972


$3,540


$1,835


Hawaii

$4,386

$7,073

$7,355


$4,203


$1,657


Iowa

$2,367

$5,297

$6,163


$2,857


$935


Idaho

$3,477

$6,147

$6,332


$3,193


$928


Illinois

$3,641

$7,054

$7,040


$3,537


$1,556


Indiana

$3,137

$5,998

$6,174


$3,003


$1,402


Kansas

$3,187

$6,514

$6,930


$3,292


$1,421


Kentucky

$3,044

$5,727

$6,080


$3,082


$1,372


Louisiana

$3,679

$6,598

$6,561


$3,425


$1,971


Massachusetts

$3,481

$7,017

$7,022


$3,479

$1,882


Maryland

$4,341

$7,994

$7,458


$3,671


$1,749


Maine

$3,107

$6,054

$6,531


$3,375


$1,286


Michigan

$3,436

$6,049

$6,113


$2,971


$1,523


Minnesota

$3,025

$6,299

$6,898


$3,244


$1,338


Missouri

$3,265

$6,333

$6,757


$3,279


$1,346


Mississippi

$3,218

$5,634

$5,718


$3,043


$2,011


Montana

$3,285

$5,977

$6,868


$3,385


$1,506


North Carolina

$3,481

$6,566

$6,710


$3,397


$1,486


North Dakota

$2,141

$5,362

$6,646


$3,326


$1,467


Nebraska

$2,717

$5,909

$6,498


$3,136


$1,388


New Hampshire

$3,582

$7,140

$7,443


$3,519


$1,666


New Jersey

$4,126

$8,011

$7,882


$3,928


$2,241


New Mexico

$4,373

$6,906

$6,534


$3,532


$1,207


Nevada

$4,733

$6,993

$6,357


$3,700


$1,185


New York

$3,906

$7,127

$7,234


$3,986


$2,495


Ohio

$3,313

$6,383

$6,530


$3,135


$1,465


Oklahoma

$3,484

$6,789

$6,900


$3,493


$1,641


Oregon

$3,618

$6,502

$6,481


$3,245


$856


Pennsylvania

$3,282

$6,550

$7,059

$3,457


$1,545


Rhode Island

$3,524

$7,162

$7,313


$3,371


$1,786


South Carolina

$4,019

$6,537

$6,559


$3,281

$1,375


South Dakota

$2,584

$5,710

$6,900

$3,250


$1,531


Tennessee

$3,388

$6,309

$6,505


$3,308


$1,737


Texas

$4,350

$7,591

$7,119


$3,779


$1,945


Utah

$3,364

$6,411

$6,713


$3,070


$932


Virginia

$4,132

$7,956

$7,968


$3,985

$1,692


Vermont

$3,681

$6,197

$6,547


$3,297


$2,511


Washington

$3,947

$7,365

$7,190


$3,500


$1,355


Wisconsin

$2,740

$5,673

$6,289


$2,914


$992


West Virginia

$2,914

$5,573

$6,158


$3,238


$1,166


Wyoming

$3,523

$6,356

$6,889

$3,663

$1,442

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Citibank to Repay $335 Million to Consumers in CFPB Settlement

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

MagnifyNews-02-01

Last week, Citibank agreed to repay $335 million in fines to an estimated 1.75 million consumers, as a result of a settlement with the Consumer Financial Protection Bureau. The settlement found that Citibank failed to reassess and adjust APRs on 1.75 million credit card accounts over an eight-year period.

Under the Truth and Lending Act, creditors must reassess APRs at least once every six months and maintain proper documentation, providing written notice when APRs increase and why they rose.

While the act doesn’t require creditors to reduce consumers’ APRs, it does require them to take reasonable action to ensure they are charging consumers fair and reasonable rates. The CFPB found that Citibank was not abiding by these regulations, hence requiring the $335 million repayment to consumers.

While Citibank is required to repay consumers, they did not receive a fine from the CFPB since they, “self-identified and self-reported the violations to the Bureau, and self-initiated remediation to affected consumers.”

“Citi is pleased to have resolved the matter with the Bureau, and we reiterate our sincere apologies to our customers for not correcting these issues sooner,” Citibank said in a statement.

“Citi estimates that about 90 percent of the interest rate savings due to customers were delivered as required. Citi is currently issuing refunds for the remainder to 1.75 million credit card accounts. Refunds, which will average $190, will continue over several months and be largely completed by year-end.”

Consumers rights for getting APRs reevaluated

Per Chapter 3 of the Truth and Lending Act, consumers have several rights when it comes to APR increases and the subsequent revaluation required by creditors.

Here’s a breakdown of your rights:

  • Generally, APRs can’t be increased within the first year of account opening. There are a few exceptions that must be disclosed to be in effect; they include an increase due to: the end of a promotional period, a variable APR change, the end of a temporary hardship agreement or a minimum payment not received within 60 days of the due date.
  • Creditors must provide written notice if your APR is increased. This notice includes reasons why your APR increased.
  • If your APR was increased, it should be reevaluated at least once every six months. During these reviews, your creditor should reassess the factors it initially considered when it increases your rate, to see if those factors have changed and whether your rate can now decrease.

Tips to save on credit card interest

Complete a balance transfer. If you are currently carrying a balance on a credit card with a high APR, completing a balance transfer can be a great way to save on interest charges and get out of debt. You can transfer your balance to a balance transfer credit card offering a low or 0% intro period, and benefit from intro periods as long as 21 months. During the intro period, you can take the needed time to pay back balances while avoiding high interest charges. Just beware balance transfers typically come with a 3% fee, but this is often outweighed by the amount you save in interest. However, there are intro $0 balance transfer fee cards available that can increase your savings.

Use a card with an intro 0% APR for new purchases. If you carry a balance month to month or plan on making purchases that you can’t pay for by your statement due date, a credit card with an intro 0% APR for new purchases can save you money. These cards won’t charge interest during the intro 0% APR period — which can be as long as 20 months. So any recurring expenses you have or new purchases you may make won’t rack up interest charges. Just remember to pay your balance in full before the intro period ends so your balance isn’t hit with the ongoing APR.

Negotiate with your bank. Some banks are willing to work with you if you are struggling to make payments or are incurring high interest charges. You can try speaking with a bank representative to see if they can work out an agreement where they lower your APR. Even if it’s just temporary, a lower APR for a short period of time is better than none at all. Try to pay each bill on time and in full so you don’t have to worry too much about your APR and avoid interest charges.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Student Loan Interest Rates Are Going up Again

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Interest rates on federal student loans will go up for the second year in a row, with borrowers for the 2018-19 school year paying 0.6 percentage points more than last year to take out loans from the Education Department.

  • Direct subsidized loans for undergraduate borrowers: 5.05%
  • Direct unsubsidized loans for undergraduate borrowers: 5.05%
  • Direct unsubsidized loans for graduate or professional student borrowers: 6.60%
  • Direct PLUS loans for parent, graduate and professional student borrowers: 7.60%

Why loan rates are going up

Federal student loan interest rates reset every year. Per legislation signed into law in 2013, the rates are based on the high yield of the 10-year treasury note during the last auction held before June 1. The rates remain in effect for all loans disbursed in a 12-month period between July and June of the following year. On May 9, the 10-year note had a high yield of 2.995%.

Once the auction occurs, the rates are calculated by adding several percentage points to the 10-year treasury note yield, to cover the “administrative costs” of issuing the loans, according to the 2013 legislation that enacted this system. For undergraduate loans, the rate is calculated by adding 2.05 percentage points. For direct unsubsidized graduate loans, add 3.6 percentage points, and for PLUS loans, add 4.6 percentage points.

Interest rates, in general, have been on the rise over the last few years, so the bump in cost of borrowing isn’t a surprise. The good news is that Congress set a cap on student loan interest rates when it came up with the new formula. The bad news is those caps are pretty high, so student loan interest rates are likely to continue rising, as long as we remain in this rising-rate environment.

Interest rates cannot exceed 8.25% for undergraduate borrowers, 9.5% for graduate borrowers with direct unsubsidized loans and 10.5% for PLUS loan borrowers. Even though rates increased significantly this year, they have much more room to grow, which we may see if rates continue along the path they’ve been on recently.

What this rate change means

For the most part, borrowers with existing federal student loans will not see their rates change, as all federal student loans disbursed after July 1, 2006 carry fixed interest rates.

Students and parent borrowers taking out federal education loans between July 1, 2018 and June 30, 2019 will pay the new interest rates listed above. The rates will remain in effect for the life of the loan.

How to lower your student loan interest rates

Student loan borrowers have few options for lowering their interest rates. You could either combine all or most of your federal student loans with a direct consolidation loan once you leave school, but that may or may not save you money (more on that in a minute). You could also refinance your student loans with a private lender, but in exchange for potentially lower interest rates, you give up the benefits exclusive to federal student loans, like income-driven repayment plans and student loan forgiveness. Private lenders may or may not offer loan deferment or forbearance (as federal loans do), which allow you to suspend payments if you go back to school, fulfill military service orders or experience financial hardship, among other qualifying circumstances.

You can preserve those benefits with a direct consolidation loan. Your interest rate on that loan will be the weighted average of the interest rates on the combined loans, rounded up to the nearest one-eighth of one percent. The weighted average is what makes this a tricky decision: If your loans with the highest unpaid balance have the lowest interest rate, you may end up with a lower interest rate when everything’s combined. But if your largest balances have the highest rates, you could actually receive a higher interest rate.

If you’re comfortable refinancing with a private lender, keep in mind you’ll need good credit to qualify for the best rates. You can check out our list of the best student loan refinance offers to get a sense of your potential savings.

How to reduce the amount of interest you pay on student loans

Refinancing and consolidating aren’t the only ways you can reduce how much you fork over to the Education Department. Consider committing to one or both of these strategies:

Pay the interest as you go

Unless you have a direct subsidized undergraduate loan, you will be responsible for paying the interest your loan accrues while you are enrolled in school at least half-time, in your grace period (the time between leaving school and entering repayment) or in deferment. When you enter repayment, that interest will be added to your principal loan balance, meaning you will end up paying interest on that interest. By paying the interest as you accrue it, you can avoid this situation, called interest capitalization.

Of course, many students may not have the means to make such payments while in school, but if you can, you may save yourself a lot of money in the long run. This generally only applies to borrowers of direct unsubsidized loans and graduate PLUS loans, as the Education Department pays the interest on subsidized student loans while the borrower is in school, grace period or deferment, and parent PLUS borrowers generally enter repayment once the loan is disbursed.

Pay more than the minimum

Once you enter repayment, your loan servicer will send you a statement saying how much you owe each month. You can pay more than that, and by making extra payments toward your principal balance, you can reduce the amount of interest you pay over the life of the loan. This is a nice alternative to refinancing your student loans to a shorter term, if you’re worried about taking on a higher, required monthly payment.

Make sure you tell your loan servicer that you’re making an additional payment and you’d like it to apply to your principal balance. Otherwise, the servicer may hold onto the money as a future payment. While that means you may not have to pay the next month, you’re also not saving anything by sending over your money early. It’s a good idea to check our account after making such a payment, to ensure the servicer processed it properly.

This story was updated on July 2, 2018, after the Department of Education updated rates on its student aid website. It was originally published May 9, 2018.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Amex Wins Big With Supreme Court Ruling in Antitrust Case

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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American Express scored a big legal victory on this week. In a 5-4 decision, the Supreme Court upheld a lower court ruling in Amex’s favor, allowing it to keep provisions in contracts that prevent merchants from dissuading cardholders from using American Express credit cards by offering them discounts or promotions. This practice by merchants is known as “steering” and it’s often a result of merchants wanting to avoid the higher merchant fees associated with Amex credit cards.

In the case — Ohio v. American Express Co. — the U.S. Department of Justice had argued American Express’ anti-steering provision, which it included in contracts with merchants, hurt competition among card issuers in violation of antitrust laws. The removal of these provisions would have allowed merchants to steer cardholders toward using other credit cards that charged lower merchant fees, like those issued by Visa and Mastercard.

The court ruled there wasn’t sufficient evidence that Amex’s anti-steering provisions hurt competition. On the contrary, the court found that competition increased while the provisions were in place, with credit card transactions increasing 30% from 2008-2013.

“The Court’s decision is a major victory for consumers and for American Express,” company chairman and CEO Stephen J. Squeri said in a statement. “This was a long battle, but well worth the fight because important issues were at stake: consumer choice, fair market competition, and the ability to deliver innovative products and services to our customers, both consumers and merchants.”

Here’s a breakdown of the court’s opinion on the ruling and what it means for American Express:

The court threw its support behind Amex’s higher merchant fees, citing the cost of the company’s rewards program and the value it offers cardholders:

“Amex’s increased merchant fees reflect increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price. It uses higher merchant fees to offer its cardholders a more robust rewards program, which is necessary to maintain cardholder loyalty and encourage the level of spending that makes it valuable to merchants.”

The states tried to argue that Amex’s higher merchant fees were a result of their anti-steering provisions, but the court found the opposite. While American Express’ merchant fees are high, the fees charged by Visa and Mastercard also continued to rise.

“Visa and MasterCard’s merchant fees have continued to increase, even at merchant locations where Amex is not accepted.”

The states tried to argue that Amex’s 0.09% merchant fee increase from 2005-2010 was not solely used toward cardholder rewards and that resulted in Amex charging anti-competitive prices. But, the court found no evidence to prove the states’ argument.

“The plaintiffs’ evidence that Amex’s merchant-fee increases between 2005 and 2010 were not entirely spent on cardholder rewards does not prove that Amex’s anti-steering provisions gave it the power to charge anti-competitive prices […] Output of credit-card transactions increased during the relevant period, and the plaintiffs did not show that Amex charged more than its competitors.”

The anti-steering provisions were thought to hinder competition among credit card companies and networks, but the court found that the provisions actually promoted competition and the market improved. Competing networks Visa, Mastercard and Discover were also cited as exploiting Amex’s higher merchant fees for their benefit, citing their lower merchant fees and broader merchant acceptance — nearly 3 million more locations — compared with Amex.

“The plaintiffs also failed to prove that Amex’s anti-steering provisions have stifled competition among credit-card companies. To the contrary, while they have been in place, the market experienced expanding output and improved quality. Nor have Amex’s anti-steering provisions ended competition between credit-card networks with respect to merchant fees. Amex’s competitors have exploited its higher merchant fees to their advantage.”

An interesting point the court mentioned was that merchant steering practices harm Amex more than you may expect:

“When merchants steer cardholders away from Amex at the point of sale, it undermines the cardholder’s expectation of “welcome acceptance”—the promise of a frictionless transaction.”

After being steered toward a non-Amex card, the cardholder may be less likely to use an Amex card in the future since merchants may not “welcome” it as much as other cards. This harms Amex since their cards aren’t used as frequently, and this can create a ripple effect, harming cardholders and merchants, the court said. Amex cardholders may lose out on robust rewards and merchants may not receive the typically higher transactions that Amex cards provide.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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10 Places You Can Earn Six Figures and Still Feel Broke in 2018

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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A six-figure income may not go as far as you think depending on where you live. After factoring in taxes, debt payment and living expenses like child care and transportation, a family earning $100,000 in certain cities could still find themselves struggling to get by. Last year, MagnifyMoney published “The Best and Worst Cities to Live on Six Figures.” This year, we’re back for the 2018 edition to uncover the metro areas where a household income of $100,000 can still leave you strapped for cash.

For this study, we created a hypothetical, but fairly typical, couple with one child who earns a combined gross income of $100,000 (or $8,333 monthly). We estimated monthly expenses, debt payments and tax obligations to calculate what the family’s disposable income would be in various metro areas based on the average lifestyle of a six-figure earner in the corresponding metro area. Then, we ranked the locations from places where they would have the most and least disposable income.

The order in this year’s ranking has changed from last year due to changes in living costs like housing, transportation and child care. But you’ll notice many usual suspects on the worst list and some familiar faces on the best list.

Places Where You Can Earn 6 Figures and Still Be Broke

How the study — and our findings — evolved in 2018

There are a few changes to the methodology in our 2018 study. We focused on the largest 100 metros this time around as opposed to some 381 metros last year. We also took a more detailed approach to calculating variables that impact a family’s disposable income. Here are the updates we made:

We based our case study on a family earning a gross income of $8,333 per month. Then we subtracted their monthly expenses, debt obligations and savings to come up with an estimate of how much cash they’d have left over at the end of the month.

Savings. We assumed the family contributed $500 monthly to their 401(k). Last year, we assumed the family set aside 5% of their savings in a regular savings account. This year, we changed the savings to 401(k) contributions because it’s something of a bastion of corporate middle-class personal finance, and it offers a tax benefit.

Tax assumptions. Our study assumes the couple will file jointly for 2018. They took the standard federal deduction and received a federal $2,000 credit for their one child. They also took the standard deductions and credits offered by their state, and took advantage of the pretax DCFSA child savings plan to deduct the $5,000 maximum from their taxable income by their employer. The couple had insurance premiums paid from their pretax income by their employer and their 401(k) contributions paid from their pretax income by their employer.

Debt: We assume the family had a monthly student loan payment of $222, which is the median student loan payment according to the Federal Reserve. Housing and auto debt are bundled in with the housing and transportation cost budget line items in monthly expenses.

Monthly expenses. We based monthly expenses — housing, transportation, food, utilities, household operations, child care and entertainment — for each location on data taken from the Bureau of Labor Statistics, the Department of Housing and Urban Development, Care.com, Kaiser Family Foundation and the Federal Reserve. We calculated an average for these expenses taking into account the lifestyle costs of a six-figure earner.

Compared with last year, we beefed up the monthly necessity expenses — although by no means hit them all — by adding costs like household operations costs and utilities to get a more realistic sense of how much people would have left over after paying their basic bills. We also added health insurance since it’s one of the most basic expenses.

Read the full methodology here.

Key takeaways:

  • In San Jose, Calif. (the seat of Silicon Valley), a joint income of $100,000 with a preschool-aged child means a couple would have to run up their credit cards $454 a month just to make monthly bills on the basics (not including compounded interest on that credit card debt)
  • In McAllen, Texas, a couple earning $100,000 can expect to have around $2,267 left over every month after paying bills.
  • In fact, the five places where couples can expect the most in disposable income are in Texas and Tennessee, where there’s no state income tax, and metros in Florida (also without state income tax) tend to have six-figure earners with plenty of money left over.
  • Regionally, with the exception of Minneapolis — a perennial on our list of most prosperous places — the most expensive cities lie on the coasts and Hawaii, and the most affordable cities are in Southern states without a state income tax.

Worst Places to Make Six Figures

1. San Jose/Sunnyvale/Santa Clara, Calif.

San Jose, Calif., moves up to the top spot replacing Washington D.C. from last year’s study. San Jose is the location where a combined income of $100,000 is going to offer the least amount of security for our hypothetical family of three.

To make ends meet, they would need to either dip into savings or rely on credit cards to cover the $454 budget deficit. Housing in this area decreased compared with last year ($2,916 in 2017 versus $2,520 in 2018). However, an 84% increase on child care costs and 30% increase on transportation costs takes the location to the no. 1 spot. This year, we used a different source for child care costs, which could also contribute to the increase in cost.

  • Monthly income minus taxes and FICA — $7,087
  • Monthly paycheck minus taxes, FICA, 401(k), health insurance, DCFSA child savings — $5,768

2. Washington/Arlington/Alexandria, DC-VA-MD

Washington D.C. comes in at a close second leaving the family $360 in the hole each month. Housing costs increased to $2,597 compared with $2,274 in 2017. This is the most expensive metro area to find living arrangements. The general rule of thumb is to not spend more than 30% of your gross income on housing, but this recommendation could leave you house poor since it doesn’t consider your net income.

In this case, housing takes up about 31% of the couple’s gross income ($8,333 per month). However, housing takes up 47% of the family’s actual paycheck after subtracting taxes, FICA, 401(k), health insurance and the pre-tax child care saving incentive. Couple the housing costs with the transportation expense ($1,302), and a six-figure earning family can really struggle to live comfortably in and around the nation’s capital.

  • Monthly income minus taxes and FICA — $6,932
  • Monthly paycheck minus taxes, FICA, 401(k), health insurance, DCFSA child savings — $5,560

3. San Francisco/Oakland/Hayward, CA

San Francisco is about 50 miles away from San Jose (no. 1 on the list), but offers slightly lower living costs, which makes the $100,000 income go a bit further. The two cities share almost the exact same monthly expenses. It’s the $320 total saved on housing and transportation that makes San Francisco slightly more affordable than the San Jose metro area. San Francisco made it to no. 4 last year, so it’s no surprise we’re seeing it again this year taking one of the top spots.

  • Monthly income minus taxes and FICA — $7,086
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,768

4. Bridgeport/Stamford/Norwalk, Conn.

The Bridgeport, Conn., area offers some opportunity for savings in food and child care costs, but estimated utilities and transportation costs come in higher than even the top three worst places for six-figure earners. Our hypothetical family would spend almost 29%* of their paycheck on transportation and utilities alone.

  • Monthly income minus taxes and FICA — $7,035
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,678

5. Boston/Cambridge/Newton, MA-NH

Boston has the third highest cost of child care to make the list. Child care could take up a whopping 15%* of a family’s paycheck after subtracting taxes and savings contributions. Just like last year, housing is another budget buster in the Boston area eating away another 37% of their paycheck.

  • Monthly income minus taxes and FICA — $6,932
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,595

6. Oxnard/Thousand Oaks/Ventura, Calif.

Oxnard, Calif., is a new addition to the list this year, and the first metro area that doesn’t leave a $100,000 earning household in the red each month after taxes, investment contributions and expenses.

With that said, disposable income of just $138 isn’t much to write home about. An unexpected expense could easily wipe out their spare cash. Like the other California locales above, housing takes a huge bite out of their budget — almost 38% of net income.

  • Monthly income minus taxes and FICA — $7,086
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings— $5,768

7. Urban Honolulu, Hawaii

Honolulu gives the family more disposable income than Oxnard, Calif., but just barely. When all expenses are covered, the family has $140 left over to spare, which is less than last year’s disposable income of $302. Year over year, child care and transportation costs increased by 30% and 23% respectively, but housing decreased by almost 18%.

  • Monthly income minus taxes and FICA — $6,805
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,527

8. Minneapolis/St. Paul/Bloomington, MN-WI**

State income tax is one of several reasons the Minneapolis area makes the list. The estimated state tax here ($506) is higher than the top two worst places — San Jose ($206 state tax) and Washington, D.C. ($366 state tax). Housing takes up about 37% of the family’s paycheck, which isn’t ideal but less than other locations.

  • Monthly income minus taxes and FICA — $6,785
  • Monthly paycheck minus taxes, FICA, 401(k), health insurance, DCFSA child savings — $5,470**

9. Hartford/West Hartford/East Hartford, Conn.

Hartford, Conn., is another new addition to the list. Hartford offers $339 in disposable income which is more than double that of Honolulu. Housing in Hartford is the second lowest of this list taking up just 33% of the family’s paycheck.

  • Monthly income minus taxes and FICA — $7,035
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,678

10. New York/Newark/Jersey City/NY-NJ-PA

The New York metro area came in no. 5 last year, but takes spot no. 10 for 2018. It may come as a shock that it’s not closer to the top, but major savings in transportation contributes to a disposable income of $505 after bills and other responsibilities.

For a comparison, the other “worst places to live” have monthly transportation costs ranging from $1,200 to $1,400. The estimate for transportation costs in the New York area is just $997 per month.

  • Monthly income minus taxes and FICA — $6,934
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,629

Best Places to Make Six Figures

100. McAllen/Edinburg/Mission, Texas

It’s no surprise that states without state income tax make the top of the list for best places to make six-figures. McAllen also has a remarkably low monthly housing cost ($889). Last year, housing costs for McAllen were sitting at $1,086 contributing to its no. 5 ranking on the best list.

Here, the family has a nice $2,267 per month in disposable income. This surplus in cash can offer plenty of flexibility to save, invest or tackle lingering debt. Overall, household bills take up just 62%* of the paycheck in McAllen. In comparison, for San Jose, the worst metro area for six-figure earners, bills take up 108%* of the paycheck.

  • Monthly income minus taxes and FICA — $7,300
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, childcare savings — $5,913

99. El Paso, Texas

El Paso, Texas, has a slightly higher housing cost than McAllen ($1,060 versus McAllen’s $889). In El Paso, the hypothetical family gets a disposable income of $2,135, again, enough to comfortably stash some cash away for a rainy day while keeping current on bills.

  • Monthly income minus taxes and FICA — $7,301
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,913

98. Chattanooga, TN-GA

Chattanooga, Tenn., offers low child care and health insurance, but comes in third with a disposable income of $2,048 thanks to the higher housing cost ($1,116) and transportation cost ($1,186) . These two major living expenses are higher than McAllen and El Paso, but when combined still only take up 39% of net income.

  • Monthly income minus taxes and FICA — $7,290
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,894

97. Memphis, TN-MS-AR

Memphis has higher housing costs than the locations above but more affordable child care. Child care ($622 per month) is lower than even the two best metro areas — McAllen and El Paso (both $686 per month). The family gets a disposable income of $1,970, which is a respectable sum.

  • Monthly income minus taxes and FICA — $7,290
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,984

96. Knoxville, Tenn.

Knoxville, Tenn., is yet another southern metro area in a state with no income tax. Housing and child care costs put Knoxville behind Chattanooga and Memphis. But together, housing and child care costs, two big ticket budget line items, only eat up about 31% of the household’s paycheck.

  • Monthly income minus taxes and FICA — $7,290
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,984

95. Lakeland-Winter Haven, Fla.

The monthly disposable income at Lakeland-Winter Haven, Fla., clocks in at $1,850. The health care costs ($525) are considerably higher here when compared with other cities even the most expensive places for six-figure earners. San Jose, Calif., and Washington, D.C., have health care costs of $402 and $456, respectively.

  • Monthly income minus taxes and FICA — $7,306
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,866

94. Jackson, Miss.

Jackson, Miss., is the first locale on the best places to live list that has a state income tax. Jackson offers a disposable income that’s just two dollars shy of Lakeland-Winter Haven, Fla. at $1,848. Despite the state tax, housing ($1,082 per month) and child care ($514 per month), it’s still an affordable place to call home for six-figure earners.

  • Monthly income minus taxes and FICA — $6,993
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,627

93. Youngstown/Warren/Boardman, OH-PA

Youngstown, Pa., is the only location representing the Northeastern states in this list. Child care is high ($694) compared with other states that have affordable living. But housing and transportation costs are comparable with other locales, and health care is noticeably lower at $331 per month.

  • Monthly income minus taxes and FICA — $7,069
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,823

92. Deltona/Daytona Beach/Ormond Beach, Fla.

Daytona Beach, Fla., is in a no-income tax state but has high housing, transportation and food costs, which takes it down a few pegs even below two states that have state taxes. Bills take up 70%* of net income.

  • Monthly income minus taxes and FICA — $7,306
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,866

91. Toledo, Ohio

Toledo, Ohio, rounds out the top ten best places for six-figure income households. Like, Youngstown, Pa., Toledo has high child care costs ($694 per month) when compared with the other affordable locations. Food and entertainment costs can also put some pressure on the purse strings. But overall, the household will pay just 70%* of their paycheck on household expenses.

  • Monthly income minus taxes and FICA — $7,069
  • Monthly paycheck minus taxes, FICA 401(k), health insurance, DCFSA child savings — $5,823

*These numbers have been corrected due to an editing error.

**Due to a data collection error, the health insurance costs for Minneapolis were incorrectly calculated. We have updated the ranking for Minneapolis from #5 to #8. 

Additional Findings:

  • Residents of the New York metro (10th on the list) get a bit of a reprieve, thanks to low cost public transportation. They’ll have $505 left over every month for things like clothes, toys, and co-pays for their kid.
  • Other states with no income tax include Nevada, Vermont and Washington, but expenses there are high enough to eat up most of the savings (Seattle is the 13th brokest metro).

Background & methodology:

The hypothetical family we created is a typical one that earns a combined income of $100,000 (the median income for a married-couple family in 2016 was $81,917, and 39% of such couples earned at least $100,000 that same year).

We were pretty conservative about the couple’s financial and debt obligations by making the following assumptions:

  • Both have corporate-style employers who offer typical benefits.
  • They have one child currently in day care.
  • Between them, they contribute 6% of their income to their 401(k)’s, which is considerably less than the median rate of 5% from an employee in a matching plan (page 40; assumes the employee is contributing half of the 10% median).
  • Only one of them has student loans and is making the median payment of $222 a month.
  • The entire household is on one person’s group insurance plan.
  • The family has average spending habits and expenses for where they live.

To calculate federal and state taxes, we assumed the following:

  • The couple will file jointly for 2018;
  • Took the standard federal deduction;
  • Received a federal $2,000 credit for their one child
  • Took the standard deductions and credits offered by their state;
  • Took advantage of the pre-tax DCFSA child savings plan to deduct the $5,000 maximum from their taxable income by their employer;
  • Had insurance premiums paid from their pre-tax income by their employer;
  • Had their 401(k) contributions paid from their pre-tax income by their employer.

The following variables were used to create their hypothetical expenses (each is the average cost for the geography indicated in parentheses):

  • Federal tax contribution (national, but adjusted for state average health care premiums)
  • State tax contribution (state)
  • FICA contribution (national)
  • 401(k) contribution (national; see notes on assumptions)
  • Insurance premiums (state)
  • Housing costs (MSA)
  • Transportation costs (MSA)
  • Food costs (regional)
  • Utilities cost (regional)
  • Household operations costs (regional)
  • Child care costs (MSAs where available (half of the MSAs), and state averages where not)
  • Student loan payments (national)
  • Entertainment costs (regional)

Sources include the Bureau of Labor Statistics; the Department of Housing and Urban Development; the Tax Foundation; Care.com; the Kaiser Family Foundation; the U.S. Federal Reserve; and the U.S. Census Bureau.

Full ranking:

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here

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How Fed Rate Hikes Change Borrowing and Savings Rates

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Since late 2015, the Federal Reserve has raised the upper limit of its target federal funds rate by 1.50 percentage points, from 0.25% to 1.75%, and is on track to raise it another 0.25 points this month.

Fed rate changes have wide ranging implications for consumers and MagnifyMoney analyzed Federal Reserve rate data to illustrate how the rates consumers pay for loans and earn on deposits have changed since the Fed started raising rates two and a half years ago.

  • According to our analysis, credit card rates are most sensitive to changes in the federal funds rate, almost directly matching the rate change with a 1.41 point increase since December, 2015. Credit card rates will continue to rise in line with the Fed’s rate increases, and if the Fed raises rates again the average household that carries credit card debt month to month will pay over $150 in extra interest per year compared to before the rate hikes began. MagnifyMoney estimates 122 million Americans carry credit card debt month to month.
  • Student loan and auto loan rates have also risen sharply, but only half as much as credit card rates, in part because they are longer term forms of lending that are less reliant on the short-term federal funds rate. Federal student loan rates are set based on the 10-year Treasury note rate each May.
  • Savers at big banks have seen little change, with the average savings and CD account passing through only a fraction of the rate increase, but that masks a big opportunity for savers who shop around and move deposits to online banks. Online banks have aggressively raised rates, and now offer rates in the 2% range, versus just 1% in 2015. That’s over 20 times what typical accounts pay.

Credit cards

Most credit cards have a rate that’s directly based on the prime rate, for example the prime rate plus 9.99%. As a result, card rates tend to move almost immediately in line with Fed rate changes. In the current cycle, the rates on all credit card accounts tracked by the Federal Reserve have increased 1.41 points, in line with the Fed’s increase of 1.50 points.

That said, consumers can still find attractive introductory rate offers.

For example 0% balance transfer offers have continued to remain long even as the Fed has hiked rates, with offers still available for nearly 2 years at 0%.

Credit card issuers make up for the rate hike by the automatic rise in variable backend rates, as well the increasing spread between the prime rate and what consumers pay on new accounts. They can also increase other fees, like late payment fees or balance transfer fees to keep long 0% deals viable.

The Federal Reserve tends to hike up interest rates gradually over time. And people in credit card debt will barely notice the rate increase in their monthly statement. When rates are increased by 0.25%, the monthly minimum due on a credit card will increase $2 for every $10,000 of debt.

The danger of such a small increase in the monthly payment is complacency. Remember that by paying the minimum due, you could be in debt for more than 20 years.

Rates are expected to keep rising, so it make sense for consumers to lock in a low rate today. The best ways to lock in lower rates are by leveraging long 0% balance transfer deals or by consolidating into fixed rate personal loans.

Savings accounts

On average, savings account rates haven’t changed much since the Fed started raising rates. That’s largely because big banks with the biggest deposits and large branch networks have less incentive to offer higher rates, and this skews national data on rates earned because most savers don’t shop around to find higher rates at online banks and credit unions.

Consumers who shop around can find much higher savings account rates than three years ago, and shopping around for a better rate on your deposits is one of the best ways to make the Fed’s rate hikes work in your favor.

Back in 2015, it was rare to see savings accounts pay 1% interest.

Today, many online banks are competing for deposits by offering savings account rates approaching 2%, flowing through about half of the Fed’s rate hike into increased rates for depositors. These rates will continue to rise as the Fed hikes rates.

CDs

CD rates have moved faster than savings rates, up 0.11 points for 12-month CDs since the Fed started raising rates. That’s in part because they are a more competitive product that forces consumers to rate shop when they expire at the end of their 6-month, 12-month or longer term.

But that rate rise doesn’t fully reflect what some smaller banks are passing through, as the banks with the largest deposits have been slow to raise rates.

The rates on 1 and 2 year CDs at online banks have been increasing rapidly, and are now well over 2%, reflecting much of the Fed’s rate increases since 2015.

The rates on 5-year CDs have not been increasing as quickly. As a result, the rate curve has been flattening.

A reasonable strategy would be to invest in short-term (1 and 2 year) CDs. If competition at the short end continues, you can get the benefit in a year on renewal.

And if long-term rates start to rise, you can redeploy or build a ladder in a year.

Student loans

Federal student loan rates are set based on a May auction of 10-year Treasury notes, plus a defined add-on to the rate. As of July 1st, rates for new undergraduate Stafford loans are expected to increase to 5.04%, up from 4.29% before the federal funds target rate began to rise.

Since student loan rates are determined by the 10-year Treasury rate, rather than a short-term rate, they are less directly related to changes in the federal funds rate than some shorter term forms of borrowing like credit cards. Instead, future market views of inflation and economic growth play a role. Federal student loan rates are capped at 8.25% for undergraduates and 9.5% for graduate students.

For private refinancing options, rates depend on secondary markets that tend to follow longer term rates, rather than the current federal funds rate, but in general, a rising rate environment could mean less attractive refinancing options.

Personal loans

Personal loan rates tend to be driven by many factors, including an individual lender’s view of the lifetime value of a customer, funding availability, and credit appetite. Most personal loans offer fixed rates, and in a rising rate environment overall, we expect these rates will go up, making new loans more expensive, so consumers on the fence should consider shopping for a good rate sooner rather than later. Since the end of 2015, rates on 2-year personal loans tracked by the Federal Reserve have increased by 0.56 points.

Auto loans

Prime consumers who shop around for an auto loan can still find very low rates, especially when manufacturers are offering special financing deals to move certain car models.

But the overall rates across the credit spectrum have gone up since the Fed raised rates, in part due to the rate hikes, and in part due to recent greater than expected delinquencies in some parts of the auto lending market.

Mortgages

Since the Fed started raising rates in late 2015, 30-year fixed-rate mortgages have increased from approximately 3.9% to 4.5%, or about half the increase of the Fed funds rate.

The mortgage market tends to follow trends in longer term bond markets, like the 10-year Treasury, since mortgages are a longer term form of borrowing. That shields them from some of the impact of Fed rate increases, and it’s not unusual for mortgage rates to decline during some periods when the Fed is raising rates.

What can consumers do

Rates are only going to go up. That means life is going to get more expensive for debtors, and more rewarding for savers.

If you are in debt, now is the time to lock in the lowest rate possible. There are still plenty of options at this point in the credit cycle for people to lock in lower interest rates.

If you are a saver, ignore your traditional bank and look online. Take advantage of online savings accounts and CDs to earn 20 times the rate of typical big bank rates.

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Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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