February 4, 2010
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News: Americans Flipping Priorities
The recession has created a dilemma for many Americans as they try to make ends meet. When there isn't enough to meet the payments on credit card accounts, mortgage loans, and put food on the table, something has to go. According to a recent report by Trans Union, consumers have changed the traditional approach to managing monthly expenses and are choosing to pay their credit card payment over mortgage payments. The traditional response to a shortage in cash typically led consumers to pay their mortgage payment before attending to any other expense or credit card payment. However, according to Sean Reardon of the TransUnion credit reporting bureau and author of the report, the recession has motivated Americans in a financial crisis to flip their priorities.
The TransUnion report indicated that 6.6 percent of the sample were delinquent on their mortgages, but continued to pay their credit card payment on time during the third quarter of 2009. However, only 3.6 percent of the sample were delinquent on their credit card payments and yet remained current on their mortgage payments. Reardon attributes a deteriorating housing market and record breaking unemployment as the most likely reason for the flip. Experts have speculated that under the pressure of the rising cost of living and unemployment, many homeowners just simply walked away from their homes. However, many cardholders have met the daily needs of their family with credit making their cards a valuable entity for survival.
Not long ago consumers attended to their mortgage payment first. TransUnion records indicate that in third quarter 2007 mortgage delinquencies for consumers current on their credit card payments were 3.95 percent and of those current on their mortgage payments, 4.6 percent were delinquent on card payments. According to the report, California and Florida had the highest incidents where residents neglected mortgage payments in place of meeting card payments. The study sample included households that had at least one card account and one mortgage loan. TransUnion looked at 30 days or more delinquencies between second quarter 2008 and third quarter 2009.