• 25
  • April
    2011

Despite the danger of foreclosure, consumers are more likely to pay credit card bills before making their mortgage payment, says credit reporting agency TransUnion. This trend was first seen in 2007, but significantly increased in the years since.

In 2010, only 3.03 percent of debtors who had both credit card bills and mortgage payments were current on their mortgage and at least 30 days late on a credit card. In 2008, the same group numbered 4.1 percent.

This shift in payment trends is attributed to the sharp decline in property values and the concurrent rise in unemployment. Consumers don't want to lose access to their credit cards in case they need them for daily items like groceries or emergencies, analysts say. Also, because a credit card minimum payment is much lower than the average mortgage payment, homeowners dealing with a loss of income are more likely to have the ability to pay the credit card minimum.

In addition, credit card companies will often cancel a card if only one or two payments are missed, while it may take a full year to foreclose on a home after a missed payment. Therefore, many homeowners juggle their credit card and mortgage payments in order to attend to day-to-day necessities.

In the TransUnion survey, respondents in Nashville and throughout the country said that they would pay their mortgage first if they could only afford to pay one of the two. However, the data indicates that something else is happening: in the last quarter of 2010, 52 percent of homeowners made credit card payments while defaulting on their mortgages, and only 22 percent made mortgage payments first.

Source: ABC News, "Consumers Still Pay Credit Cards Before Mortgages", Eileen AJ Connelly, 31 March 2011