Friday, May 24, 2013
Higher Interest Rates on Loans, Credit Cards Expected If Debt Ceiling Deal Not Struck
If the U.S. government defaults on its financial obligations, how exactly will it affect Alaskans?
Alaska's lawmakers have warned that if a debt ceiling deal isn't made by Aug. 2, all Americans will feel the impact.
Little progress has been made between the White House and Congress as the deadline continues to loom overhead. If the U.S. government defaults on its financial obligations, how exactly will it affect Alaskans?
Jan Jones, a credit and housing counselor at Consumer Credit Counseling Service of Alaska in Anchorage, predicts that if a deal isn't made soon that inflation will rise at a rapid rate that would affect all consumers.
She said that when inflation skyrockets, interest rates go up. Economists say higher interest rates for home, education, and car loans price people out of the market. Higher interest rates would also hit credit card users.
“All of the things that allow us to get ahead faster than saving the money in the bank are going to be affected,” says Jones.
The shrinking effect on the economy would hit businesses and could mean job losses across the country, she says.
“A minimum of three months of your living expenses need to be held in reserve at all times so you can cover a loss of income due to reduction in pay or loss of job for a period of time,” Jones advises.
People who already have loans wouldn’t be affected—just those who are trying to get one.
But it goes beyond just loans and credit. The cost of the essentials like gas, food, and clothing would also rise if a debt ceiling deal isn’t struck.
Most businesses operate on credit and an increase in interest would mean higher costs would likely be passed on to consumers.