If Democrats and Republicans cannot hammer out a deal that will allow the U.S. to continue meeting its debt payments, it may lead to a downgrade in the nation’s credit rating. Consequently, the interest rates Americans pay for everything, including their credit cards, could increase.
Currently, the interest rate on the average American credit card is about 14 percent, but if the nation defaults on its hundreds of billions in loans, those will likely increase sharply, according to a report from Fox Business. However, the changes wouldn’t affect existing debt, just those accrued after the country’s credit rating was downgraded.
“Auto loans, student loans, mortgages, credit cards, all of these could have potentially higher interest rates if Congress can’t reach a deal or raise the debt ceiling,” personal finance expert Lynette Khalfani-Cox told the news agency. “It’s potentially quite dire for an economy that’s still struggling and a public that’s barely keeping its head above water.”
However, lawmakers reportedly remain confident that the gridlock can be broken by the time the nation’s debt payment deadlines arrive, though time is drawing short.