The government partially shut down on October 1, after our elected officials could not agree on funding. This definitely affected the people of Salt Lake City, as well other areas across the country by adding stress into their lives. However, for the hundreds of thousands of federal workers who were let go, this should not have a direct impact on anyone who has a loan or uses credit, as long as you are able to pay your bills. This is a good thing for anyone who has or would like to apply for a credit card. You can breathe easy.
Credit Cards Are a Unique Type of Loan
A credit card is an unsecured loan. In other words, your credit score, credit history and your ability to repay your debt now determine your interest rate and other terms.
Therefore, the government shutdown isn’t going to be the reason you are able or unable to pay your bills each month. Even if you are a government worker who lost his or her job temporarily due to the shutdown, it is likely that you will get your job back shortly. At least that is our hope. While this may cause you significant stress, keep in mind that it will not last forever.
Additionally, there is a bill making its way through Congress that would allow back pay to be issued to anyone who is currently furloughed. At the end of the day, no one is going to be approved or denied for a loan based on the current government situation. However, this is another friendly reminder that we should all have some money in the bank, for a rainy day!
Currently, many small businesses in the Salt Lake area are realizing that people may not be spending money the way that they once were. This may cause a bit of a local economic issue, as well as one on a larger scale. A local bookstore owner is trying to remain positive about the situation, but readily admits that stress and depression are hovering when looking at not only her sales and profits but also the fact that small businesses depend on banks, who depend on the government for business loans.
Credit Cards Are Different Because There Is No Actual Money Being Lent
When a bank loans money to a customer, it does so with funds already within its reserves. That is why savings accounts accrue interest. Your money is used to fund a home loan for your neighbor or a car loan for your colleague at work. However, a credit card is literally new money being created where there was no money before. As long as you are good to pay the bill each month, you can get the credit card. The credit card processing companies can't really do much if you are paying your bills on time.
What Happens If There Is Debt Default?
Where things could get interesting is if there is a debt default. If this happens, the interest rates on loans will skyrocket and the value of the dollar could plummet. We have seen this several times over the years. This can result in major job losses and an almost total collapse of the economy. In the event of a debt default, you may need to have sterling credit to get a credit card.
The good news for those using credit cards is that you don't have a lot to worry about just yet. As long as Congress avoids a debt default, you should continue to have the ability to use or apply for credit cards as long as you have good credit. While interest rates may creep higher for the time being, there should be no credit freeze on the horizon. However, this issue is bound to bring up anxiety filled days and nights. Before the stress eats you away, take a break. Have some alone time where you can just allow yourself to relax and not think of anything at all. Consider talking things out with a trusted friend. Some times it helps to just let things out. Give yourself a break.