The ultimate analysis of recent credit card news reports
This credit card news blog prides itself on breaking stories quickly, and providing useful context for what’s happening. But heavyweight newspapers have longer to research and write. So let’s look at a couple of the in-depth features that have appeared in the press over the last few days to see what they’ve added.
Credit card debt prioritized over mortgage payments
Nearly a month ago, IndexCreditCards carried a news blog (Credit cards versus mortgage payments: which would you pay first?) about the growing tendency of consumers to prioritize staying current with their credit cards over making timely mortgage payments. It highlighted the disconnect between what people say they would do if they were ever to be faced with this choice, and what they actually do when they’re forced to choose.
On Saturday, The Washington Post covered the same ground. It didn’t contain as much hard data as this blog, but it did explore the reasons for a disconnect between what people think they’d do and what they actually do.
Credit cards versus mortgages: a hard choice
The Washington Post echoed this blogger’s view that, if you’re desperate enough, it may appear to make perfect sense to prioritize credit card payments. Mark Cole, who is an expert is credit education, told the newspaper:
“If you get into the mind-set of a person experiencing financial distress, this is a perfectly rational and logical response. They didn’t have enough in savings, and credit cards became the shock absorber.”
And, The Post went on, if you’re relying on that shock absorber to feed your family and keep your power connected then you’re likely to try to keep current with your cards over everything else, especially as foreclosure can seem a distant prospect.
That may be an understandable choice, but it’s one that few credit experts recommend. Certainly, the consensus among those who spoke to The Post was that mortgages should always come first.
Credit card use and debt rising
On Friday, The New York Times published a story about the recent growth of both credit card use and debt. This is a continuing topic that has been covered a number of times on this blog over recent months.
The Times tied the revival in both these to the economic recovery, and saw the recent resurgence in credit card companies’ profitability (MasterCard posted first-quarter profits up 24 percent earlier this year) as evidence that the nation’s confidence in the economy is growing. It quoted Cristian deRitis, who is Moody’s Analytics’ director of consumer credit analytics:
“The positive news from the credit card issuers and processors is directly related to the increase in consumer spending over the past nine months and a more positive outlook for spending going forward.”
Let’s hope he’s right.
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