07/28/2011 01:20 pm ET | Updated Sep 27, 2011

If Pretend Debt Ceiling Negotiations Lead To Downgrade, Credit Card Users Get Hit First

For most of the 21st century thus far, Americans spent well beyond their means, purchasing the life they wanted on credit, incurring debts that always looked as if they could be paid off later. And it's understandable why they'd do that -- while most of our 20th century wars were fought at home by a populace that rationed and sacrificed for the greater good, the Global War On Terror enjoined us to spend money, and go on vacation. So spend we did.

And then, in 2008, the economy collapsed after all of the bets Wall Street had made on our debts collapsed. The good news: To the American people's enduring credit, they've modified their behavior and adapted to new realities and are now living more within their means. Per Chris Morran, at the Consumerist:

According to TransUnion, one of the three major credit bureaus, consumers actually spent $72 billion more paying down their credit cards than making actual purchases in 2009 and 2010.

"Our analysis shows that consumers have made a concerted effort to pay down their credit cards during these uncertain economic times," said TransUnion's VP of research and consulting. "This reversal is even more profound when you consider that alternative forms of revolving credit, e.g. home equity lines of credit, were far more accessible in 2004 than in 2009... So while charge-offs have played a major role in lower credit card debt levels, it was not the only factor. Consumers were also paying down their debt across the risk spectrum."

Whether they are spending more productively or simply spending less, Americans are honoring their obligations and paying their bills. But there is that one group of Americans -- lawmakers in the House and Senate, mostly -- who are out there pretending to have a debate over raising the debt ceiling, and pretending that they may not honor their obligations to pay for the things they voted for over the past few years and default. Of course, this is all fun and games until the nation's credit rating is downgraded from it's current AAA status. And if that happens, you want to know who the first people to take the hit are? Well, they are the very same people who have made an effort to spend responsibly since the financial collapse.

As Credit.com explains, if the U.S. AAA credit rating goes down, interest rates will rise across the board, including the rate you have to pay on your favorite piece of plastic:

"So if the U.S. has to pay more to borrow, the prime rate that banks pay to borrow money to lend out to consumers goes up. And guess what happens when this increase makes it all the way down the food chain to the consumer? The vast majority of credit cards have variable rates and they go up and down with the prime rate. So if the prime rate goes up, your variable rate goes up by the same amount."

Just one more way the ongoing pretend negotiations over the debt ceiling are imperiling you.

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