More Consumers are Paying Credit Cards, Not Mortgages

For the last several months, statistics have shown that American consumers have been paying their credit card bills before they are paying their mortgage payments. A recent study shows that that trend is still continuing despite the steady increase of the American economy and fewer delinquent mortgages in the last year.

Those numbers could be deceiving, however. For one thing, the number of delinquent mortgages could have fallen because people have walked away from their homes leaving them to go back to the bank. When the bank takes possession of the home, it is no longer on the list of delinquent mortgages. Nonetheless, the trend of paying credit card bills and disregarding the importance of paying mortgage payments is something that has been a major trend for three years.

Transunion, one of the three main credit reporting agencies, has noticed that people are beginning to pay their mortgages again, even if it is in a small number. This is the first time in many months that the percentage of people who are current on their credit card bills and those who are 30 days or more late on their mortgage bills is starting to drop. Sean Reardon, the author of this latest study, says that the latest numbers show that consumers are adjusting their financial behaviors according to their “personal financial environment.”

The study shows that the percentage of American consumers who are current on their credit cards and delinquent on their mortgage payments was as high as 7.4 percent in the third quarter of 2010. That was up more than 3 percent from the first quarter of 2008. However, in the last quarter of 2010, those numbers fell to 3.03 percent, which is the lowest rate ever. That’s good news for people who think the economy is still going downhill as these numbers are an indication that things are starting to improve.

In the last quarter of 2010, 52 percent of homeowners defaulted on their mortgage payments while staying current on their credit card bills. Only 22 percent of homeowners defaulted on their credit card bills while still making their mortgage payments and staying current on that.

The study also showed some more surprising numbers. For instance, the largest group of people that simply walked away from their home (30 percent) was homeowners of at least 65 years of age. Only 25 percent of those who walked away were between the ages of 18 and 34. More than 20 percent of the people who walked away from their mortgages had a monthly income of at least $8,000. About half of the people who walked away made at least $4,000 each month.