Should You Pay For Child Care With Credit Cards?

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Like many parents, Dyana King relies on childcare to be able to work and support her family.

“If you don’t work, you don’t earn income. This is especially true if you’re a single mom, ”says King, 29, who lives in Jacksonville, Arkansas. Her 8-year-old daughter and 4-year-old son both attend daycare while she runs her financial management business during the day. “I look at [child care] as a necessity. It allows me to earn an income and gives me peace of mind.

But that peace of mind comes at a high price. Almost a decade ago, as a young single mother, King said childcare was 40% of her budget. She sometimes relied on credit cards to bill payments as a last resort. After years of working to pay off nearly $ 35,000 in total debt, including what she charged on her credit card, King no longer uses the cards to cover childcare costs. Now she also warns others against this.

According to financial experts, there are specific cases where you might get credit card rewards by charging child care expenses. But for moms like King and many others, there are safer alternatives to consider for covering childcare costs. Here’s what you need to know.

How much does child care cost?

Child care costs are straining the budgets of American families – and for many, the price is rising.

More than 50% of families spent more than $ 10,000 on child care in 2020, and 59% plan to spend more than $ 10,000 in 2021, according to a recent survey. About 85% of parents spend 10% or more of their household income on child care, up from 72% in 2020, according to the survey. This means that for the majority of American families, a significant portion of household spending is spent on child care.

Child care costs ultimately depend on a combination of factors, including where you live, the type of care you choose, the age of your child and the number of hours of care per week you you need.

“Personally for me, my childcare is more than what I spend on housing,” says Rita-Soledad Fernández Paulino, a NextAdvisor contributor, mother of two and creator of the personal finance Instagram account Wealth Para Todos. “I think as parents we know this will be one of our biggest expenses.”

A case where it may be a good idea to pay for childcare with credit cards

As with any purchase you may not be able to reimburse, using a credit card for child care can be a slippery slope if you use it to cover costs that are not within your budget. . You can earn high interest and fees if the bill is not paid on time and in full each month. If you already have a balance, adding child care expenses will only put you in more debt and negatively impact your credit.

“If you know you don’t have the discipline to sweep it up and pay it off in full, I wouldn’t recommend going that route,” King said. “A few dollars in cash back or trying to stabilize your credit rating isn’t worth having a persistent debt balance. “

But if you want to use the credit to pay for child care expenses for the sake of convenience or rewards – not counting on it because you don’t have the money – there are times when it can be. financial sense.

Paying for child care with a credit card makes it easier for parents to earn rewards, automate payments, and keep records. Daniella Harrison, financial planner and founder of Harrison Financial Planning in Columbia, Missouri, says she and her husband have been paying her first child’s monthly daycare bill by credit card for years without a hitch.

“As long as parents have the discipline to pay off their credit cards in full each month, I see no problem using a credit card to pay for child care expenses,” says Harrison. “With the reward points you can receive for your purchases, it can be beneficial. “

You should also determine if your preferred daycare or school program accepts credit cards. Some don’t – and even if they do, there could be a fee. Harrison says daycare or other daycare credit card fees can go anywhere from 1% to 3%, wiping out the rewards you’ll earn with most cards. If you prefer a babysitter or nanny, you’ll likely pay them in cash or by check.

“The only reason we stopped paying the daycare bills by credit card was because our son changed schools and that school did not offer payment by credit card,” says Harrison. “Our youngest son’s center allows credit card payments for tuition, but charges an additional 1% fee for card payment.”

Alternatives to paying for child care with credit cards

Using a credit card to make ends meet should only be a last resort. If you are considering using a credit card to pay for child care expenses because you cannot pay cash each month, here are a few other options to consider first:

Flexible expense account

If you have access to a benefits program through your employer, you may be eligible for a Flexible Spending Account (FSA). These accounts can help you cover a number of different expenses, from medical bills to adoption. There is also an FSA that you can use for child care expenses, known as the Flexible Dependent Expense Account.

A Dependent FSA allows you to put pre-tax money from your paycheck into a dedicated account for child care expenses. Since the money you contribute is added to the account before tax, you reduce your federal tax burden when you add money to your account.

“I still pay for child care, but now I mainly use my FSA funds for it because of the tax benefits,” King said.

The American Rescue Plan has expanded the contribution limits for dependent FSAs. The maximum amount you can contribute is $ 10,500 for married couples and $ 5,450 for single filers in 2021. You can find a list of eligible expenses eligible for FSA dependents funds on FSADES.

Child tax credit

If you qualify, take advantage of the child tax credit to cover child care expenses. Under the American Rescue Plan, the expanded credit allows eligible families to receive up to $ 3,000 per eligible child between the ages of 6 and 17, and $ 3,600 for children under 6 in 2021.

The extended credit also distributes half of the amount they are entitled to to eligible families in advance of monthly payments until the end of 2021. If you have not received the payments you are entitled to, there is still time to sign up. and receive monthly payments for the rest. of the year and claim the rest in 2022 after you file your next tax return.

Fernández Paulino uses his early payment of the Child Tax Credit for child care expenses while saving money for a future down payment on a house. She recently told NextAdvisor that parents shouldn’t “feel guilty or ashamed of spending that money on overdue bills, groceries, debt, child care, or whatever else you feel like. appropriate “.

Emergency fund

Don’t go into debt or borrow money for necessary expenses that an emergency fund might cover. If you have an emergency fund, large or small, use it to cover your child care expenses before relying on a credit card. Then use the money you still have to start building your savings over time. When you are in a better financial position later on, you can focus on replenishing your emergency fund.

If you don’t already have emergency savings, you don’t have to wait for a financial rebound to start saving money. Even if childcare takes up a large portion of your budget, making a small contribution to a savings account can help protect you against unexpected payments. Setting aside just $ 5-10 a week can add up in the long run.

Government or non-profit child care programs

If you consistently struggle to pay for child care, consider child care assistance programs in your area and state. Each state operates a subsidy program for childcare, and there are also state-funded kindergartens that your child may be eligible for. Eligibility requirements are different in each state, but you can find more information about your state’s program at

Many communities also have options for before and after school care, or child care for young children. Look for nonprofit organizations and churches that offer child care in your area, like the YMCA and the Boys & Girls Club of America, which are often more affordable than private child care.

Final result

Child care is expensive, but charging the cost on a high-interest credit card that you can’t pay off can lead to even more expensive and lasting debt. Consider other options, such as subsidized care or child tax credit payments, before you rely on the credit.

However, if you pay off your balances in full each month and are looking to maximize the rewards, you can earn cash back, travel, or other perks on your childcare expenses. Just consider the fees the vendor might charge that can wipe out the value you will get. In most cases, you are probably better off sticking with cash or a check to cover your child care expenses.

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