According to the latest Experian study on the sub-prime lending market, sub-prime consumersthose with an Experian credit score of 620 or lowerare more likely to be 30 days or more late on their mortgage payments than on their unsecured bankcard obligations. As consumers have historically paid mortgage debt over bankcard debt, this finding represents a significant departure from conventional behavior. There are several reasons why credit cards are being paid before home mortgage payments.
The late fees are typically higher for credit cards than a mortgage.
Credit card companies immediately know when the payment is late. The interest rate on the account will immediately be raised.
If the customer is close to their credit limit, and late fee penalty and increased interest charges put them over their limit, then other fees and penalties are assessed and added to the account.
When the home has negative equity, payments are unaffordable, and default inevitable, the consumer will lose hope and prepare for foreclosure. They will stop making mortgage payments. They may sell furnishings and fixtures from the home to raise capital.
Attitudes have changed with the wide acceptance of credit cards. Credit cards are accepted nearly everywhere business is conducted. Credit cards and automatic teller machines became the petty cash my parents so carefully saved for a rainy day.