As consumers wade their way through the economic and housing crisis and try to stay above water, a new study has suggested a fundamental shift in the payment hierarchy that is seeing credit card payments getting paid off before any type of mortgage payments.
"Conventional wisdom has always been that, when faced with a financial crisis, consumers will pay their secured obligations first, specifically their mortgages," said Sean Reardon, a consultant for TransUnion.
However, he added that the most recent study regarding consumers with at least one credit card and one mortgage between the second quarter of 2008 and the third quarter of 2009 had found just the opposite.
The study, which Reardon authored, concluded that the percentage of consumers who are paid up on their credit cards but delinquent on their mortgage payments had risen to 6.6 percent in Q3 2009 compared to 4.3 percent in Q1 2008.
On the other hand, the percentage of consumers who were square on their mortgage payments but delinquent on their credit card payments was found to be 3.6 percent in Q3 2009, down from 4.1 percent in Q1 2008.
Reardon said that the survey’s results were consistent with earlier TransUnion studies and could be evidence of a new payment hierarchy that would continue in the years to come.
The study also found that California and Florida were among the states that saw the most evident differences in delinquencies between the two payments.