The biggest credit news this week is all about the government shutdown, as furloughed Americans may turn to credit to supplement lost income.
The federal government shutdown on Tuesday means that hundreds of thousands of Americans have been furloughed. For those who have to go without a paycheck for a few weeks, a payday loan may be an option they turn to.
We explain the risks and rewards of payday loans consumers need to know before they sign on for these short-term loans. There are a few other options for people in this situation: withdrawing money from an emergency fund, taking out a personal loan, using a credit card cash advance, and putting purchases on a low-interest credit card. However, some people don’t have enough in their emergency fund to cover weeks’ worth of expenses, personal loans take time and good credit to acquire, and some may not have access to credit cards.
It’s important to understand the terms of any payday loan — or any other type of credit — before signing on.
This article looks at some of the largest and most painful effects the shutdown will have on Americans. First up is the fact that many Americans who have been furloughed may never receive their back pay. This puts many Americans in a sticky financial situation that could require them to turn to their credit or savings to supplement their income until they get back to work. Veterans could also be in the same boat if the government shutdown lasts more than a couple weeks.
Other effects include fewer food inspections, no nutritional assistance for the Women, Infants and Children program, and no flu monitoring by the CDC.
As many Americans may be turning to their credit cards to ride out the shutdown, it’s important to understand the larger impact a reliance on credit cards can have on major financial decisions.
Scott Sheldon runs through the reasons credit cards can stop a home deal in its tracks, and more importantly, how it can cost you more on your mortgage for years to come.
A lender sees every dollar you put on a credit card as a dollar you can’t put toward your monthly mortgage payment, which can limit your ability to borrow, even if you have a great credit history.