In 2009 through last year, credit cards had been first on consumers’ list when deciding which bills to pay first, over mortgage and other debts. This year, however, their priority has shifted to paying mortgages and utilities first, new study data show.
For its research, Auriemma Consulting Group conducted an online survey of 509 U.S. adult credit card users in September.
Among the respondents, 83% cited credit cards as a top financial obligation, 59% cited utility payments, and 51% cited mortgage or rent. However, in terms of payment priority, 77% of respondents gave mortgage payments the highest priority, followed by 52% who cited utility payments and 38% who cited credit cards.
By comparison, in 2009, consumers ranked credit cards first, mortgage payments second and auto loans third. Auriemma did not provide the percentages of consumers who prioritized each payment for 2009.
Today, the housing-market crisis that caused the shift has abated somewhat, and consumers are now back to paying their housing debts first, Bob Taglin, Auriemma director, tells PaymentsSource.
Consumers’ primary concern now is the “fear” factor of potential foreclosure on mortgages and having utilities cut off, while concerns with credit card payments are not nearly as important, Auriemma’s report says. “We agree that a large percentage of mortgages have already been written off, settling the market,” said Taglin. “Homeowners who got burned or saw others get burned have returned mortgage payments to #1.”
In 2009, foreclosures were not an instant reality, and many consumers chose to pay down card debt first instead of pay into failed mortgages. Now those foreclosures are coming to fruition and are more likely to happen if consumers do not make mortgage payments, Taglin says.
“The shift makes sense in that usually mortgages were the priority in the past,” he says. “There was a good amount of angst with the housing crash and economic situation [in 2009], but now people are much more nervous about losing their homes or power.”
Looking closer at credit card payments, Auriemma’s survey determined that avoiding late fees was the top reason this year for not missing a credit card payment, cited by 57% of respondents, followed by 41% who cited maintaining a card with either a low interest rate or rewards points, and 35% who were concerned about the impact on their credit scores.
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