Inflation is eating away at our pocket books. With prices of just about everything on the rise, we're feeling the bite of inflation more on a daily basis.
UNO Economist Dr. Mark Rosa explains:
"If the price of chicken goes up too much, you're going to see people substitute for chicken. If the price of that goes up too much, you'll trade down again."
Inflation is a dangerous thing. Rosa talked about inflation and what it can do to an economy if it keeps rising at this rate.
"Runaway inflation, double digit inflation, is very destructive to an economy. It can lead to a recession; you could have businesses closing because of this. You could have people being laid off which makes matters worse."
While people cut back and others invade savings to make ends meet, Rosa says busting out the credit card is the last thing you want to do with interest rates and inflation both going up with no end in sight.
"You're making matters worse, you're not helping, it seems like that in the short run, at least I can pay a light bill or something, I'll just put it on the credit card and kick the proverbial can down the road. Well by the time you catch up with it, the can is bigger. And you've got double digit interest rates there."
Rosa says with interest rates in flux and headed upwards, the danger is seeing credit card interest rates go up resulting in higher balances and bigger bills to pay off.
"Credit card debt seems to re-price more quickly than any other debt any person would have. So if the Fed is raising rates to try to stave off inflation, it's adding immediately the rate change to any credit card debt. And it applies immediately to a balance a person is carrying."
Rosa says the only way to beat inflation is to keep money tight and not look at short term solutions like raiding savings accounts or spending on credit cards. Above all, he maintains keeping card balances as low as possible and keep making payments to savings accounts to build up a six month reserve of money in case you find yourself out of a job.
