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Will Bank Credit Downgrades Affect Me?

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The interest rates and fees consumers are accustomed to paying for banking accounts, credit cards and other lines of credit may soon start to increase as a result of a recent downgrade in the credit ratings for a number of major institutions.

Moody’s Investors Service downgraded the credit ratings for major U.S. financial institutions like JPMorgan Chase, Bank of America and Morgan Stanley late last week, according to a report from the Associated Press. Experts say the practical upshot of this change will be that consumers will likely face increased costs with regard to the various accounts they have with those institutions. And while bank customers might be concerned over whether their money is safe, there is nothing to worry about in this regard.

Instead, they may want to start thinking about the way in which these new interest rates and fees might affect their overall finances, the report said. For instance, current customers may see the fees they pay for basic checking services – many of which may have been free in the past – increase to new levels after having already been introduced as a result of heavier federal regulation. Further, other new ones may be introduced, making it more difficult for bank customers to afford the accounts they’ve held for some time.

In addition, the interest rates consumers pay on their various lines of credit – such as mortgages, credit cards, auto loans and so forth – will likely increase as well, if they have variable-rate accounts, the report said. Further, those seeking new accounts will likely find it more difficult to qualify for the financing they may be seeking, as a result of those institutions once again tightening their credit qualifications to improve the overall health of their lending portfolios. And already, experts have long been noting that still-tight mortgage lending restrictions may be holding back the housing market from recovering more quickly and in earnest.

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Credit card lending, meanwhile, has been expanding significantly in the last several months, as improving credit conditions have led many of the nation’s largest financial institutions to offer more accounts to subprime borrowers.

Image: Alex E. Proimos, via Flickr

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