Consumers Pay Credit Cards First

[blessed]

This little article came from my mortgage broker's newsletter today...

In this troubled economy, an increasing number of consumers are opting to pay their credit cards before they make a mortgage payment, according to a report from TransUnion. This is a flip-flop of traditional priorities.

TransUnion concluded in a statement that this trend could portend higher mortgage delinquency rates, but was understandable in an economy where many people are out of work.

"You cannot buy groceries with your house," says Sean Reardon, author of the study and a consultant in TransUnion's analytics services unit.

The study was conducted between the second quarter of 2008 and the third quarter of 2009. The delinquency rate for consumers who were delinquent on their mortgages, but current on credit cards during fourth quarter of 2007 was 19.1%. That delinquency rate rose to 29% in the third quarter of 2009.

That's scary and sad to me.

[kornellred]

Trouble is - once the mortgage is in arrears and gets reported to the credit reporting agencies, the unsecured creditors will react by jacking up interest rates,freezing or lowering credit limits, or possibly closing the account and demanding payment in full.

It can be nothing more than a stalling tactic.

[norcal]

It's a juggling act. I paid my credit card payments, so I could use them to buy groceries and pay the utilities. It worked until I was late on one with a 4% interest rate (missed date by accident). Then they jacked up the rate to 29.99% and basically tripled our payment. At that point we could juggle no more. That was about a year and a half ago.

It has brought us to where we are now. Though this has all been stressful, I will be so relieved when it is all over and the bank has taken back the house (upside down about $250,000) and we are discharged. We are excited at the prospect of a fresh start and are actually looking forward to renting for a few years. Now I just need to find a house to rent.....that is actually my biggest stress right now.