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.
This post comes from Kelli B. Grant at partner site SmartMoney.
The average consumer has an average of $6,355 in credit card debt, according to a CreditKarma.com 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 SmartCredit.com. 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 Credit.com. "There's a lot of competition right now among issuers," she says.
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:
VIDEO ON MSN MONEY
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.
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.
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.
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 . . .
CREDIT = SLAVERY!
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!
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.
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.
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.
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.
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.
Personally learned with a struggle ....if you don't have the cash to pay for things, then you just don't need it!!!!!
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.
TIPS FROM OUR SPONSOR
RECENT ARTICLES ON CREDIT SCORES
Saving just a single month of expenses may take longer than you think. See how your savings rate affects how quickly you can build a solid emergency fund.