More consumers return to paying mortgages before credit card bills
Back in April 2011, IndexCreditCards.com reported an intriguing phenomenon — starting in the first quarter of 2008, consumers who had both mortgages and credit cards were for the first time prioritizing paying their plastic over their home loans.
Now that situation is reversing again, and homeowners who are forced to make a choice are once more beginning to prioritize their mortgage payments, according to the September 2013 edition of the same tracking study cited in the initial report. TransUnion, the credit bureau that conducts the study, forecasts that by the end of this year most people in that position will be paying their home loans first.
Credit cards less important than mortgages
That would see the end of a situation that has troubled credit counselors and debt experts. The received wisdom has traditionally been that secured debts, such as mortgages, should always take priority over unsecured ones, including credit cards. The long-term, strategic consequences for those who don’t follow this rule are likely to be financially damaging.
However, at the height of the Great Recession, many desperate consumers seemed to perceive their plastic as a critical lifeline, one that sometimes was their only way of putting food on their families’ tables. Understandably, they may have feared the immediate loss of that ability more than the distant and uncertain prospect of foreclosure.
Psychology and sociology students might recognize this instinct from Maslow’s Hierarchy of Needs. Everyone might recognize TransUnion’s prediction as one of the surest signs yet of a significant decline in the number of Americans who are in a state of desperation as they struggle to stay afloat financially.
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