More skip mortgage to pay credit card

Consumers realize that the penalties for missing a card payment are much more immediate than those for being late on the house note.

By MSN Money Partner Aug 18, 2011 2:43PM

This post comes from Kelli B. Grant at partner site SmartMoney.


Fewer consumers are up to their eyeballs in credit card debt these days -- but for some, a lower credit card balance is coming at the expense of the mortgage.


The average consumer has an average of $6,355 in credit card debt, according to a report released this weeky -- 18% less than this time last year.


Consumers are getting better about paying on time, too. Last week, a study from credit-reporting bureau Experian found that 20% fewer consumers are 60 days late on their credit card payments than were in 2007, while a separate study from TransUnion this week said the 0.6% who are 90 days late is the lowest in 17 years.


Consumers are reacting to the increasingly punitive measures that credit card companies take when cardholders miss payments, including penalties and higher rates, says John Ulzheimer, president of consumer education at Ironically, that's coming at the expense of payments to lenders that are seen as more lenient, particularly mortgage lenders. The Experian study found that 25% more mortgages are 60 days late than were in 2007.


Prioritizing credit card payments over the mortgage can actually be a smart short-term strategy to get back on track, given that credit card penalties are pricier and faster to take effect, Ulzheimer says. "It's taking forever for mortgage lenders to foreclose on and actually evict consumers, and I think they know that," he says. (Do you have too much debt? Try MSN Money's calculator.)

And a TransUnion study earlier this year found that consumers are considered less risky if they are behind only on their home loan, versus delinquent on multiple smaller loans. Post continues after video.

Find a better credit card

Of course, delay mortgage payments long enough, and you'll risk foreclosure -- and no one wants that. But there are a number of changes consumers could make to their credit card accounts that could cut interest costs and free up at least some of the cash needed to cover all their bills, says Beverly Harzog, credit card expert for "There's a lot of competition right now among issuers," she says.


Savings could top $600 for switching to a card with a lower interest rate or (if you pay your balance in full) better rewards.


Those with a balance should hunt for a 0% balance-transfer offer -- the best offers allow up to 24 months and charge no more than a 3% fee, Harzog says. Consumers with only a small emergency fund, or who expect to make a few big purchases in the coming months, should also look for 0% offers on purchases for the first year, she says.


Cardholders can also benefit by paying down debt "the right way" -- that is, starting with the highest-rate balance first. The difference could save you hundreds of dollars more over the course of a year.


More on SmartMoney and MSN Money:


Aug 19, 2011 1:04AM
The first thing to get paid if my wife or I lost our job would be the mortgage. Our credit card debt
would be the least of my concerns. I would do everything to keep my house and a roof over or heads. The credit card company's that screwed me over years ago jacking up my rates during the economic downfall when i was Never late would not get a dime. They jacked my APR's up to get more out of me to help ease there loses. Then they get there almighty Bail Out at our tax dollars expense. Well they can bail me out or Kiss My A**. I would file Bankruptcy and start over before they got paid and i would keep the house. This housing bust has caused my property value to fall well below the amount of my mortgage. So no equity would be there to force the sale of my home to pay them off.

Aug 18, 2011 10:43PM

What about skipping a mortgage payment to cover food, gasoline & power bills? 


 We don't own any credit cards anymore, haven't had any in the last 7 years. Our decade plus old cars are paid up.  Once a year our checks get lean (in august) and we skip a house payment, but we are able to save and get caught up by december.  We ignore all the harassing phone calls and letters from the bank until then. 


I really don't care about my credit score, financing is over-rated,  I belive in paying cash for everything because it keeps my out of "trouble" so to speak. 

Aug 19, 2011 7:52AM
     Seven years ago I thought I was set to retire in 2 years, ready to take it easy and enjoy retirement with my wife who had begun to decline in health.  Skip ahead to present time and I've just walked away from my home, packed a suitcase, and debating between living in Uruguay or Thailand.  My wife passed away over 6 years ago, I was injured badly in a car accident 4 years ago, and last year was realizing my limitations for a man of 66 years with a bad hip.  I put in papers for retirement in Oct 2009, in Jan 2010 I got my gold watch.  I called the bank to explain that I was now retired and living off a much smaller income than before.  The lack of help was appalling to me.  Not only had I been with this bank for over 30 years, only once in the past 11 years of my mortgage had I paid late prior to my retirement.  I sent them what I could, which was about 400 less than my mortgage was, but it was all I could afford to pay.  I even tried selling my home, by owner, but there were 72 homes for sale in my neighborhood alone within 1 sq mile.  
     Finally went seeking help for loan modification from my son, who printed up the papers from a website, and submitted it to the address listed on the website.  We got a letter back saying that the papers were given to my bank...  6 weeks and my phone rang, and the bank was wanting tax forms, copies of my bank statements, any credit card information (of which I only had one for emergencies).  My credit score of 802 I thought would work in my favor in showing that I want to pay my payments, I just needed a little bit smaller payment as my income was cut almost in half.  Needless to say that was not the case.  "Because we look at all of your financial data as well as income generated, your 2009 income is within the right parameters for the current monthly payments, and we will not modify your loan to a lower payment."  Great, so did they give me a time machine to go back to 2009 when I did have the income to afford my house? I explained to the woman on the phone again, I have retired, I want to pay for my home, but I cannot possibly afford the current payments on my retired income.  I am looking for help before there is a problem.  But such things are frowned upon by the banks I guess.  She suggested that I wait until I file my 2010 taxes and try to apply again, meanwhile when can they expect my next monthly payment? 
     Should of honestly just mailed the keys to the bank then.  The hoops I jumped through with the whole mess could of put me in traction.  
     Around Dec 2010 I finally quit sending them money all together.  Jan 2011 I turned off the house phone and bought one of those pre-paid cell phones.  Feb comes and I'm looking at pamphlets  for retirement communities.  May comes around, and after many letters from the bank requesting payment, I get a letter from some 3rd party business stating that my home is to be auctioned on 7/11/11 at 9am.  Looking at the paper further, the paper was notarized in Feb. 2010.  One month late and they notarize a paper to auction a home I've been trying to work with them on getting a loan modification?  What really gets me heated is there was no foreclosure notice from the bank.  Just 8 copies of this letter signed by some guy who doesn't even work for my bank, and a notarized date of one month behind on my payments.  They can keep it, I wasn't happy about a home I purchased for 178,000 9 years ago being worth 32,000 today but I tried for a year to only succeed in bringing my credit down 300 pts.  
     You'd think by now they'd learn they can get a heck of a lot more money if they work with these families with existing loans than trying to sell/rent/auction a property that is worth less than half of what it was at loan signing.  

Aug 18, 2011 8:58PM

I would never recommend that anyone delays their mortgage payment to pay credit card debt.  Credit card penalties will not cause me to lose my home, mortgage penalties can and will.  I would prefer to be safe in my house rather than risk foreclosure.  A judgment from a credit card company can be paid at the closing of a refinance.  A foreclosure could prevent me from ever owning a home again.  If you are forced to make a choice of which bill to pay, always pay that mortgage.  If you are facing foreclosure and a trustee sale of your home, a credit card judgment is the least of your worries.


This article is irresponsible garbage.

Aug 18, 2011 8:07PM
I am amazed that people are so deep in debt. My husband's motto was "Save, save and save some more." We never had the very best. We paid cash for what we bought. We did not keep up with the Joneses. If we wanted to buy something, we saved up and paid cash. No, we didn't have the cream of the crop. But we aren't butt deep in debt today either and everything we own is free and clear. We can sleep at night.
Aug 18, 2011 11:05PM

Better than all these bs solutions - PAY THE BANKS NOTHING! The whole system is in a freefall anyway. Don't throw away good money after bad. Find a cheap place to rent (if you can), ignore the phone calls, screw overrated credit, save your cash in a safe. Homes are no longer an investment but merely shelter. Don't live beyond your means. Only buy what you can afford to pay for outright. I have no debt and no credit, because . . . 


Aug 18, 2011 11:33PM
Pay on the home loan and file BK on the credit cards.
Aug 18, 2011 11:38PM
A lot of folks are truly hurting out there today. Some are more fortunate than others and do not need to resort to methods such as this to try and make ends meet. But let me tell you this...the credit card companies do not give a darned about you. If you default on their balance, some will eventually sell your account and receive money for it.  Others will hire an attorney and make your life a living hell. If for one minute you think your mortgage holder is not going to hit you up with penalties and the possibility of foreclosing on your home, think again. If you forego your mortgage payment for a month or two, they will report negatively on your credit bureaus, all 3 of them Guaranteed. This is also the case for not paying any other debts you may have.  The best method is to pay your loans and credit cards. If you cannot maintain, consider Consumer Credit Counseling or Bankruptcy and do away with all. In most cases, you'll be able to keep your house if it's not delinquent. Think twice before you do something you're going to regret for MANY years to come.

There are a lot of bitter people writing things on this blog because of their situation or the situation around them. A lot of them are venting and you would be a fool to follow anyone's specific advice to do this or that.

I'm nobody here and just trying to shed some much needed light. Be cool folks and think clearly at all times. Good luck to all!

Aug 18, 2011 11:10PM

Some of the mortgage companies and almost all of the credit card issuing banks are vultures and thieves. We must, first, resolve to pay off all credit cards and, second, never use them again. What should happen is a historic, radical shift in the financial behavior of the American people: terminate your relationships with credit card issuers and boycott them forever. If that means that credit card issuing institutions die, then let them die. We got along fine before the advent of the BankAmericard and we'll get along fine without them.


As for the mortgage bankers, the post office, the government, all other financial institutions, the dollar, and all companies could all collapse tomorrow, unemployment could reach 99%, but the mortgage bankers would still be there to foreclose on your home.

Aug 22, 2011 12:59PM
Who wrote this article? A debt collector?  It is far more important to keep your house payments up than to pay your credit cards. That is unless you can't keep the payments up and you are already behind. Face it, if you are late or behind on ANY reoccurring payments it will ruin your credit rating. It is far better to save your place to live in  because it will be next to impossible to qualify for a new home loan or even as a renter with bad credit ratings. You can live without credit cards ,but where are you going to live w/o a house?
Aug 18, 2011 9:24PM
This is really a piss poor article. I almost lost my home when my husband became very ill. Believe me, it's not cheap, nor is it easy to get caught up. 
Aug 19, 2011 2:06AM

If a family was hungry I'm sure they would buy food before paying banks. Not America they would cut health care the hungry or anything else before they would miss an interest payment to banking.

   Most of our debt is owed to banks, mainly the federal reserve. Americans will starve before big banks get cut. Our 4 biggest have 8 trillion in assets and have been getting billions in 0% loans to play the market. Our big corporations are making record profits form slave labor and getting special treaties along with tax breaks to outsource.

   Our capital gains tax where most giant money is made is only 15%. When the middle class is declining and poverty is growing the politicians still take care of the wealthy and screw the public. We better unite and put millions in the streets with specific demands before we are in depression and chaos.

 There is only one grouped more greedy and repulsive than our corrupt corporate and financial systems and that is their government.

Aug 18, 2011 10:47PM
Yeah the info that's available is crap. There is no good advice on what to do. I'm a single woman, out of work, taking money out of my IRA to supplement the paltry unemployment benefits (they're only a percentage of your previous salary) so I can try to keep up with paying all my bills, including the temporary modification amount for my mortgage. I can't take out of my IRA forever, however, there's not much left. I've tried for two years to get a refinance or modification and even when I was working, and I kept being turned down. Now that I'm not working and having trouble finding work, I have even fewer options. I notice it's way easy for some others to judge those who are in debt or out of work, when they themselves have a job that actually allows them to pay for things, or a spouse helping them pay the bills who doesn't struggle to do it. It must be nice to be able to judge from an ivory tower.
Aug 18, 2011 10:58PM

in 2007 my salary was almost 110,000.

6 months into my mortgage my salary was cut by $20,000. I had no credit card debt and a credit score of 795! I contacted my mortgage servicer and plead with them to modify as everyone else seemed to be doing. No deal as I was current!

A year later, I am in credit card debt for 18,000... no surprise and my salary was cut by  another 12,000. Begged Wells Fargo to modify.  No deal, i was still current.

Now a year and a half later, $54,000 in credit card debt, I've stopped paying them all. Lawyers for cards are calling and some suing.

Wells hasnt gotten a mortgage payment since May. They are calling. Awaiting foreclosure papers or finally a modification sine now I owe them almost 10,000. 

in my state foreclosures are taking 2-3 years so they'll be out 75k-110k in payments plus the attorney fees plus the fact the house is no valued about 75,000 less than I owe.

Each person needs to evaluate what their financial outlook is and figure a course of action. It is time to stop robbing Peter to pay Paul and get some clarity on your situation.

Aug 19, 2011 12:37AM
Times are tough in US right now....but DON'T do anything stupid....because things will get better.  I/we are in the same boat as a lot of Americans.  I have worked and COMMUNICATED with all of our creditors, and believe it or not most are happy to come up with a payment plan that you will be able to live with.  We are paying some of our creditors as little as $12 per month.  BUT, the key here is that we are paying them.....on time, every month.  If our situation changes, I call them and we work on a new payment plan.  The only creditor who I do not have enough awful adjectives to describe is SALLIE MAE who is the holder of our student loan.  However, after following the law to a tee, they have now backed off of me.....I warned them, and they didn't they know I meant business...but they are the only one I had any trouble with.  AND, we have NEVER been late with our mortgage payment.  We have however had to live on a wing and a prayer because we REALLY did not have a penny to our name after the bills were paid...BUT the bills were paid and they still are.....don't let creditors bully you, but don't be disrespectful to them...unless it is SALLIE MAE.....I hope this info. helps some of you who think you will never get out of the situation you are in...please don't give isn't easy, but it is better to pay $1 rather than do nothing....
Aug 18, 2011 8:48PM
You can't pass judgement on people you don't know. What if one of you got so sick that you could not work and the other person lost their job.How. I much could people pay for in cash in that situation.We are not in that situation, but I know people that are.Not everyone in debt got that way because they were living way above their means. What if every millionaire called every non millionaire lazy, because they did not earn a million dollars? Would that be accurate?
Aug 18, 2011 10:28PM

As someone who has had their home on the market for two years while watching the market crumble and housing prices dive into the cellar, after being laid off for eighteen months and not being able to gain employment in my profession of twenty-four years, I would advise exactly that.  Due to the abundance of foreclosed properties available, I have endured endless low-ball offers amounting to twenty to thirty thousand dollar short sale offers.  After finally negotiating a deal with a cash buyer that, after determining what the payoff required at point of closing, would still be a couple thousand dollars short, I have been notified by the title company that my closing costs are going to be nearly six thousand dollars, which I do not have.  If the mortgage company is unwilling to accept the buyer's offer less the closing amount so that I can break even on the deal, rather than a short sale, I will mail them the keys and relinquish posession of the home that I have continuously paid for in a timely manner for twenty-four years.

Right now, I am looking at my credit score.  It is 804.  After the negative impact of either the short sale or foreclosure, I can expect that to drop 200 to 300 points.

I don't know where puglette is getting their information, but it is incorrect.  A foreclosure will not preclude a person from ever owning a home again for the rest of their life.  As long as all other financial obligations (credit cards and car payments) are kept in good standing,  I could purchase another home at a reasonable rate in as little as two years.  Five to seven years would be the longest it could take.  That is not forever, and is definitely a timetable I can live with.

Aug 19, 2011 3:01AM

The problem with the American economy, and American society in general is that Americans have been too much accustomed to going into debt big time. That includes individuals, our Governments, and to a certain extent American corporations. As a result of this we had the huge housing bubble where massive amounts of debt/credit was used to bid up the price of properties to unsustainable levels, and then 2008 came around ahd the whold stack of cards collapsed like dominoes. After all, when real estate values were going up t0 to 20 percent a year, and your local bank was offering a home loan in 2007 with virtually zero down at an ARM or 4 percent, or a fixed 30 year mortgage at 6 percent, buying real estate seemed to be a "no brainer" in terms of wealth creation in America. Watch the infomercials of people like Carleton Sheets and that is Carleton Sheet's "bible".


I originally came from Spokane, WA (but I am currently working overseas now due to the bad US Economy).and in 2006, I saw real estate prices jump an average of 23 percent from 2006 to 2007, and I had the temptation to buy at that time, since there were bidding wars going on from out of state (mostly California) investors/retirees which benefitted from the rapidly rising real estate prices in parts of California. After all, if  you lived in your former home in Califarnia for I think two yeara (which was considered an owner occupied residence), and if you had a family, you were allowed to exclude up to $ 500,000.00 of the gain on a property tax free (at least for US Income taxes). Many Californians die that, took the gains tax free, and up they went to bid up the prices of housing in Spolane.


The problem that Spokane had is that the economy of the town is low wage based. At that time (in 2006-2007) the predominant number of jobs that existed at that time were low wage service sector jobs paying Washington State Minimum wage (a lillte less than 8 bucks an hour) or close to that. . At that wage, if you had a two wage earner family, the gross family income would be less than $ 40,000.00 a year, and if you multibply that figure by 3 for what a typical house should go for, that number would be about $ 120,000.00. But again due to the bidding wars from out of state investors/retirees, an average home would be bid up to the $ 200,000.00 to $ 225,000.00 range, and homelowners were getting that kind of money for a house. Many low wage based earners jumped into the fray/bidding wars, taking on mortgages equalling 40 to 50 percent of their monthly income, and as all across America, as the housing collapse hit (especially in California) it also hit Spokane big time. And the same play happened in other California based retiree markets like Las Vegas, Reno, Phoenix, Alburquerqie, etc.


Now what does the above story have to do with regard to not paying your mortgage and paying off your credit cards. The fact of the matter is that if people did like what I did and not get involved in the bidding wars for real estate in the first place, and just rented, and paid off your credit card balances in full every month, you would not have the problem,and you would not have had to write the article in the first place.. When one signs a 30 year mortgage agreement with the bank, it is a contract that you  sign, to pay over 30 years for that property, whether you personally bid/offer too high a price for the property, or not. In effect, every credit/debt obligation that you take on, should be honored to the fullest extent possible again if you paid too much for an item (including a home), or too little for an item or somewhere in between.



Aug 22, 2011 2:30PM
I had to do this and carried one payment behind for a year.  The bank wouldn't let me pay extra unless it was three hundred extra a month which I couldn't afford because I got laid off almost a year ago.  I tried to keep up all credit card payments but if your late you get hit with that big fee and your interest rate goes up.  Without medical insurance I had to use my credit cards for an emergency.  With the economy my house is upside down and I lost half of my IRA.  The banks get bailed out by the US government and then ream the customer.  So guess what, with no other alternative I filed bankruptcy.  I look for a job everyday, any job, yet what do alot of employers check?, your credit rating.  I'll probably end up losing my house, but if I do I am going to get the hell out of California.  California sucks unless you are an illegal immigrant who gets free education, free medical, and state aid.
Aug 18, 2011 10:28PM
If you want to keep your home, then forgo the credit cards etc, pay the mortgage.  The only difficult thing is that with some credit card companies...if you call to cancel the card and request to stop interest many are refusing to do so.  I went round and round with one and wrote, spoke to etc to request card cancelled and interest to stop on the card, which use to be a right to do.  But now with the economy the way it is so many are not honoring that and want the $$ to come into their business.  You can file complaints with the BBB though so it smears their name on a bad mark for the most part!!!
Personally learned with a struggle ....if you don't have the cash to pay for things, then you just don't need it!!!!!

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.