The U.S. is reaching its debt limit. What does that mean?
Treasury Secretary Janet Yellen alerted that the country could run out of money as soon as June 1.
The federal borrowing limit currently sits at $31.4 trillion.
So what does this mean?
"It’s kind of like the credit limit that you have on your credit card. Americans know if they were to walk into a store, if they were to buy something and put it on that credit card, but that purchase would put it over the limit, that payment would be declined. It's pretty similar for the federal government," said Sarah Foster, an analyst for Bankrate.
SEE MORE: Yellen: Social Security payments could be interrupted in debt crisis
At this point, the government has two options.
"They can either vote to raise the debt ceiling, which has to come right now, at least as far as we know, from a Congressional decision, or they can vote to suspend or eliminate the debt ceiling altogether," Foster said.
Experts say reaching the debt ceiling would impact all Americans.
"It would have consequences for pretty much every American who is hoping to buy a home, buy a car, make any of these major financial decisions. And it would also be the first time in history that the government hasn't been able to figure something out after hitting the debt ceiling," she said.
"2013, 2011, those were similar kind of major debt ceiling impasses," Foster said.
Hitting the debt ceiling could also mean a reduction in social security payments, veterans benefits, and SNAP benefits.
"It's hard to predict the chances of default, but right now they are meaningfully greater than zero," Foster said.
Trending stories at Scrippsnews.com
