AA+ credit rating effect on consumers



[Begin VIDEO with Kristin Arnold, anchor introducing the video topic]

Kristin Arnold: With the U.S. economy already on shaky ground, now comes more dire news about the country's downgraded credit rating. With how and if this will effect American consumers is senior financial analyst Greg McBride.

[Cut to a double screen of Kristin Arnold and Greg McBride]

Kristin: How significant is the downgrade to consumers?

Greg: In the short-term it's pretty minimal and the reason for that is the most significant pocketbook issue for consumers now isn't the impact of the downgrade, it's "what's the health of the U.S. economy?" If we have another recession that's really going to hit consumers a lot harder than minimal impact from higher interest rates. That being said, particularly riskier borrowers, they may well see higher rates on things like credit cards, auto loans….mortgages rates may move up a little bit eventually. But, as long as the U.S. economy remains as weak as it is, interest rates are going to stay very very low, just maybe not as low as they otherwise would have been now that the downgrade has been passed on.

Kristin: What impact does this have longer term?

Greg: Longer term, the downgrade is eventually going to catch up to Uncle Sam. When Uncle Sam pays higher borrowing rates, that's going to filter through to consumers and businesses as well. So, I think if you look down the road a year-and-a-half, two years you will see a marginal impact on interest rates and all that extra money that everybody's pouring into interest payments is less money that's getting spent elsewhere in the economy…and that represents yet another headwind to economic growth.

[Cut to one shot of Kristin on camera]

Kristin Arnold: To track interest rates on mortgages, autos, credit cards and more…just log onto I'm Kristin Arnold.



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