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Study: Consumers More Likely to Pay Credit Cards Than Mortgages

A study by the credit bureau ""TransUnion"":http://www.transunion.com/corporate/business/business.page shows that when choosing which bills they can afford to pay, consumers are more likely to pay their credit card obligations and fall behind on their mortgage payments.


And this trend is not surprising, according to the Chicago-based company. TransUnion says this trend has continued for the past three years, and while the number of consumers current on credit cards but delinquent on their mortgage has declined slightly, it is more than 70 percent higher than it was at the beginning of the ""Great Recession.""

""The percentage of consumers current on their credit card payments and delinquent on their mortgages first surpassed the percentage of consumers current on their mortgages and delinquent on credit cards in the Q1 2008,"" the company said in a statement. ""Although many industry analysts believed that a reversion to the conventional payment hierarchy would ensue once the recession had concluded, this has not been the case.""


Instead, the number of borrowers delinquent on mortgages and current on credit cards was at 7.24 percent in the last quarter of 2010, which was a slight drop from 7.4 percent in Q3. The percentage of consumers who are delinquent on credit cards but current on their mortgages dropped to its lowest level in Q4 2010, to 3.03 percent.

TransUnion says that the current economic and housing environment has consumers reevaluating their priorities.

""The reversal of the traditional payment hierarchy was driven in large part by home value depreciation and rising unemployment, both of which speak to consumer willingness and ability to pay their mortgages versus their credit cards,"" said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit.

He continued, ""Home value concerns and stubbornly high unemployment continue to drive this dynamic, though the decline in the number of consumers delinquent on mortgages and current on credit cards may be a sign that the divergence in the payment hierarchy has peaked.""

What is surprising is that when polled, consumers claim if they could only make one payment in a month, they would chose to pay their mortgage over their credit cards.

In a February study commissioned by TransUnion, 79 percent of adults said they would rather be delinquent on their credit cards than their mortgages. Despite this, TransUnion reports that of the consumers who defaulted in Q4 2010, 52 percent defaulted on their mortgages and kept their credit cards current, compared with 22 percent who defaulted on their credit cards but kept their mortgage current.

About Author: Joy Leopold


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