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Credit Card Applications » News » Other » War in Iraq

War in Iraq

February 21, 2007
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War in Iraq - Why Interest Rates Continue to Boom?

Paying for the current war in Iraq, the US has utilized its financial capabilities and relied on the UK, China and Japan to pay off its debts. Still, the shock of the war on the American economy differs from the past experience, say, the World War II. This is heavily because the States economy is much stronger now.

The United States government has cut taxes together with increased military expenditure. How you could have noticed, interest rates have given a jump since attacking Iraq. Variable loans on houses, new cars, business, and credit cards rates, actually cost more now that we're spending. Around four billion a month in Iraq - somebody has to pay for it.

Your neighbors can say that rates are increasing because the economy is rocketing. They can think the Federal Reserve keeps elevating rates because the American economy is flourishing so that they?re trying to reduce speed to monitor it. (Such people keep to the fact is that at present the interest rates are the lowest for the last 40 years). However, if the economy develops too rapidly, there?s the risk of inflation. Interest rates are mounting down to the enormous deficit and deficit spending greater than before. Successful American economy cannot finance via increased tax flows.

Speaking about war influence on banks' activity, it's important to mention the federal rate issue.

Any bank's rate depends on the federal funds rate. It is the interest rate at which a financial institution lets somebody borrow available balances at the Federal Reserve Bank to another financial institution immediately. The rate may vary daily among financial institutions. Today financial experts forecast the growth of the fed rate at or above 5.25% by the edge of 2007. They also predict US recession by the end of 2007. According to the fed rate fluctuations the Federal Reserve determine the index that lies in the base of other financial institutions? rates.

Finance professionals note that the Federal Reserve started hitching the rate in June, 2006, but the mortgage rates in fact reduced from 6.3 percent to about 5.6 percent at the beginning of February. Even the long-term rates are predicted to finally elevate (30-year mortgage approaching 6,9% by the middle of 2008).

How has the war in Iraq to do with American economy? When the basic rate of the Federal Reserve grows, people invest in businesses fewer funds, and the prices are increasing accordingly. Higher rates affect prices. Surely the Federal Reserve uses its power over interest rates to support economic increase and maintains inflation restricted. Higher rates make consumers and enterprises expend less, braking economic escalation and reducing inflation.

That is at the same time the pitfall of inflation. You may be not afraid of inflation if your credit history is superb. Still, if you have managed to earn a plainly bad credit history, it?s better to watch out.

We can expect two tendencies. The first is holding the rate and increasing the charged fees ? including the annual fee, the set up fee or the late payment fee. The second trend is modifying the rates. Changing rates can hide in wait and come out unexpectedly ? especially for those whose credit card APR is too high (bad credit). Better chances do have the people with fair to excellent credit.

These categories of customers can change their rate, calling the bank and asking a better interest, or moving balance to another credit card. So, get a balance transfer credit card to prevent your rate augmentation. Do it in timely manner!

Aside from that the sky's the limit. You are free to carry on applying for credit cards online. We offer many variants ? even credit cards for foreigners. Don?t waste your time and apply online!

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