Aug 28

The Ins and Outs of America’s Recent Credit Rating Downgrade and How It Will Affect You

wall stBasically, the situation with the recent credit rating downgrade of the nation is comparable to what would happen if an individual’s score declined. The riskier the customer, the more they have to pay in order to borrow money, and unfortunately, if the government has to pay more, then so will you.

Mortgages – Fixed rate mortgages will see no impact, but people with adjustable rate mortgages will be vulnerable to interest rate increases.

Retirement Funds – Your age and how much time you have before you plan to retire should already be factors when deciding what to do with your investments. If you have been planning to eliminate some investments from your portfolio, now may be the time to do so as stocks may stay low (or even go lower) for a while. People close to retirement age should already be investing in bonds and annuities, so they should continue with this strategy.

Credit Cards – If the prime rate goes up, or if credit card companies get nervous about the situation, credit card rates could go up between 1% and 5%. The good news is that the credit card companies will not be able to increase the rate on previous purchases, only new ones.

Auto Loans – These loans could rise slightly. Student Loans – These rates may also go up.

Savings Accounts – Unfortunately, these interest rates should not rise because these rates are associated with the demand for borrowing money from the banks. Due to the current economic crisis, people are not borrowing money from banks in order to make home improvements or to expand their businesses as much as they have in the past. Due to these circumstances, the banks do not need as much of our money in order to make it available to lend to others, so they are not willing to pay us more for our money.

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