In the past year, the cost of everything has gone up, leaving many of us to do a double take at the price of gas, groceries and other living expenses — and we can thank inflation for that.
It’s not just the price of goods and services that’s on the rise. There’s also a correlation between inflation and debt.
The relationship between debt and inflation
Inflation can negatively affect your debt because it often is accompanied by a rise in interest rates. With fluctuating rates, credit cards and other debt are likely to become more expensive as federal interest rates increase.
And if your wages remain unchanged during inflation and your cost of living increases, this equates to having less money to pay down debt. That could cause you to take longer to pay off what you owe or perhaps default on your debt.
Higher interest rates also mean the longer it takes to pay off debt, the more interest your lenders will collect.
Inflation also generally leaves you with less spending power. As a…
This article was written by Tiffany Curtis and originally published on www.nerdwallet.com