Mortgage vs Credit Card Debt: Which Do You Pay First?
Tough economic times have forced families across the country to make tough choices. When the bills come due, which do you pay first?
Reuters reports on a new survey that shows Americans are shifting their priorities when deciding which debt to pay off first.
More Americans are choosing to pay off their credit card bills before their mortgage debt, according to the survey credit bureau TransUnion:
“The percentage of consumers delinquent on mortgages, but current on credit cards rose to 6.6 percent in the third quarter of 2009.”
This is a continuation of a trend that started in early 2008, when the rate was at only 4.3 percent. At the same time, fewer Americans were delinquent on their credit cards while current on their mortgage.
This trend was even more pronounced in some of the states hit hardest by recession. In California and Florida more than 10 percent of residents were behind on their mortgage while current on credit cards.
Experts said in the Reuters report that conventional wisdom says consumers will pay off their secured debts, like a house and car, first.
But, as one expert said in the piece “You cannot buy groceries with your house.”
They speculate that by paying off their credit cards first, people are able to sustain their daily lives – buying gas and groceries – while their homes slowly sink underwater.
This may be bad news for an already battered housing industry, but most folks are only worried about what’s best for them.
In the event that a home or car is threatened by foreclosure or repossession, many consumers are turning to Chapter 7 bankruptcy, which may be able to protect such property even if foreclosure already started, the debts are high and the mortgage costs more than the house is worth.
So which is it for you? When your paycheck can only cover one bill, which do you pay? Credit cards, mortgage, car or something else?