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Most of us are aware of the looming credit downgrade that the United States government faces. If the US government’s credit is actually downgraded, it will lose it’s AAA rating, the highest of all credit ratings. This will make it costlier for it to borrow money. However, a subplot in all of this is how it will affect the average consumer.
It is all but certain that credit card users will pay the price for Uncle Sam’s spendthrift ways. The effects will be felt as consumers pay anywhere from 1 to 5 percent higher interest rates on their credit cards, according to Mac Clouse, a finance professor at the University of Denver.
However, given current laws, this will not happen immediately, as credit card companies must allow consumers to pay the existing rate for a period of 45 days after notifying them of a rate increase.
That being said, they can decide to charge the higher rate after 15 days, after which consumers have 30 more days to decide to refuse to pay the interest rate increase and pay off the balance at the existing rate.
Check with your credit card company if there is any confusion as to what your rates are and will be.
Interest rates are not the only aspect of credit cards that will be affected.
A reduction in rewards can also be expected.
As credit tightens, rewards such as airline miles are likely to suffer. Therefore, most credit card users can expect to see a decline in such offerings that are typically associated with their credit cards.
What You Can Do
If you currently rely on your credit card (s) to pay your finances, it is a good idea to find other payment options.
Consult a trusted financial advisor and work on your payment options. It is very important to have your finances as stable as possible and position yourself to use alternative payment options in the event that credit becomes too scarce or costly for you to use.