If You Had to Choose, Would You Pay Your Mortgage First or Your Credit Card Bill?

Filed in archive General on October 6, 2008

Photo courtesy of iStockphoto, christine balderas

Several studies & anecdotes have come out over the past year (including this one reported on by the New York Times) that suggest people are more likely to skip paying their mortgages than keeping up with their credit card payments or car payments. That is, if they don't have enough money to make all the payments, the mortgage payment is the First to go unpaid.

On the surface that doesn't make sense. After all, your mortgage represents the roof over your head, and in the big picture it is likely the place where you have the greatest monetary investment, when you look at the equity you have in your house or condo. But, as the article points out, the day-to-day sometimes wins out over the best financial decision:

But when faced with a choice of which payments to make, even those whose only mortgage is the family home will often push the housing payment aside. "They know they have to make payments on their credit card because they need that," Ms. Hart said, "and they need their car to get to work."

Yes, they need the house, too, but most of us are aware that it's a long road before a missed mortgage payment will get you thrown out of your house, while a missed car payment could get you repossessed, and a missed credit card payment could mean a reduced credit line, a jacked-up interest rate, and most definitely extra fees.

Given all that, it's easy to see why it happens. And if I was in that situation, I have a feeling I would make a similar choice. When you're in debt, you unfortunately get into a place where you have to put out today's fire before you even consider the larger picture. Of course that's why living the debt lifestyle is so dangerous.