![]() ![]() Other people who carry a balance on their card may see an increase in their monthly minimum payment since interest rates could increase. In a worst-case scenario, folks are unable to make their minimum payments on their credit cards, and they have to declare bankruptcy. ![]() During a recession, people may lose their jobs or experience other financial setbacks that lead them to rely on credit cards to get by. Credit card interest rates are high compared to other types of debt, and carrying a balance can be stressful for many people during good times. How a recession affects credit cardsĪ recession impacts credit cards in many different ways. FDIC insurance protects your savings for up to $250,000 in individual bank accounts, so you don’t have to worry about a recession wiping out your bank account. However, there’s no telling how long a recession could last and what kind of interest rate changes will happen to stimulate the economy in the meantime.īut as long as your bank is federally insured, you can sleep soundly at night knowing that your money is safe in your bank account. When The Fed increases rates, banks usually follow suit and raise theirs to attract more customers, which creates more cash flow. The good news is that if you keep your money in a savings account with your bank, you may see a slight increase in your return as the Fed often increases interest rates to combat high inflation. It may not be as simple to obtain a mortgage during a recession as it was before since banks will be more stringent with the approval process. Banks will be less likely to loan money to potential borrowers looking for a mortgage or a personal loan. During a recession, we may see an increase in foreclosures. As a result of these movements, you will see many swings in interest rates provided by the banks.īanks also accept that even in the best of times, there will be folks who default on their payments. Interest rates will fluctuate based on what needs to be done by the Federal Reserve to move the economy accordingly. It’s a critical time to step back and focus on the basics of personal finance: budgeting, paying off debt, saving for retirement and so on. Unpleasant as it is, a recession is a natural part of the economic cycle, and it won’t last forever. While a recession isn’t pleasant, there are ways to soften the blow. ![]()
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