Reader Question: Credit Card Bill or Mortgage Payment?
Yesterday, I received this question from a reader: I am having trouble meeting my obligations. Should I pay my credit card bill or make my mortgage payment? I suspect that with the current economy — not to mention fears of job loss — this is going to be a question asked with increasing frequency. The answer, though, is fairly straightforward:
Pay your mortgage first
When you think about it, you realize that your mortgage is secured by your house (I think the rising mortgage delinquencies could, in part, be due to a failure to recognize this). Your credit cards, on the other hand, are unsecured debt. Credit card companies and collection agencies can call you to demand payment (they have to stop calling if you ask them to in writing), and they can even sue you for some of what you owe. However, if you have no money, you can’t be forced to sell your home to pay unsecured debts. The worst is that you are ordered to set up an affordable payment plan. If you stop making your mortgage payment, you could use your house to foreclosure, leaving you homeless.
If you are concerned about paying your bills, the first thing you need to do is prioritize them. Your first priority should be your mortgage payment. Indeed, your mortgage, car loan payment, groceries and utilities are all things that you should rank ahead of your credit card payments. Because you can usually cancel things like TV and cell phone plans, these should be taken care of after credit card payments.
You should make an effort, though, to let your creditors know that you are having problems. Your mortgage lender can work out a loan modification or help you take advantage of the President’s foreclosure prevention plan. Other creditors may be willing to do a temporary deferral or modified payment payment plan — as long as they keep collecting interest.
There are options, but when it comes right down to it, if you have to make a choice, make sure that your needs are covered.
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