Inflation does more than push up prices at the store — it also makes borrowing more expensive because banks need to raise interest rates to cover the loss of purchasing power of the money they are loaning out, since they are getting repaid with "cheaper dollars". When prices rise faster than wages, household money shortages lead to mounting debt. And, unless you have a fixed interest rate lown, your monthly payments on loans and credit cards will climb higher each month. With these rising costs, you need a clear plan for tackling debt.  The Impact of Inflation on Debt When inflation rises, it affects your debts in two different ways. Rising prices change how much your debt really costs. … [Read more...]