Recently I read an article that discussed a new paradigm occurring when people can’t pay everything and decide what bills to pay.  More and more they are choosing their credit card bills over their mortgage.  But isn’t homeownership sacrosanct?  Don’t you keep a roof over your head first?  This doesn’t appear to be the case for a growing number of homeowners.  The reasoning behind the latest statistics is interesting and easy to understand.  With 1 in 4 homeowners who have a loan on their home being underwater (they owe more than the house is worth), with fears about job security, and with a low savings rate in the USA, maintaining credit is important to people who do not feel financially secure.  Therefore, they are letting their mortgage payments go and paying their credit card bills first so that they can keep that credit line if they need it.

With the banks so overwhelmed with foreclosures and short sales, many homeowners going through foreclosure get to stay in their homes for many months after they are notified they are in default.  It takes time for the process to work.  Waiting for eviction, not knowing when it will happen, and being locked out of your home is not something people want to experience, but it is happening as mortgage payments aren’t being made.  With credit cards, borrowers can lose their ability to use credit within 60-90 days if they do not make payments.

The sad thing is that many homeowners who are in default never talk to anyone to see if they can be helped.  The government HAFA program, which provides payments to the investors who provide mortgages and homeowners who are in default moves forward in April, 2010.  If you know someone who needs help, have them talk to a real estate agent who is a CDPE designee and understands what options may be available to a financially distressed homeowner.  They may be able to help lift the burden of an underwater home from the homeowner’s shoulders.  I have a team of CDPE agents who work with me and continually educate themselves on all the changes surrounding these issues.  Let us know if we can help you or someone close to you who is struggling with the decision of which bills to pay.

Here’s where you can find a list of important changes to credit card regulations intended to protect consumers.  Changes Set to Protect Credit-Using Consumers | RISMedia  I don’t know about you, but the fact that you could be a few hours late with your payment and could end up being dinged by “universal default” so that all your card rates go up, is a practice by credit card companies that I have considered very underhanded.  Universal default still exists, so look at the new rules to see how it is applied.

With the new rules, as long as your payment is received by 5pm the day it is due, you are considered to have paid on time.  Plus, if your payment due date falls on a Sunday or holiday, you get an extra day added to your due date.  The other thing I think is an improvement is that the credit card companies have to mail or deliver your bill 3 weeks before it is due and they have to give you a consistent due date.  That will help everyone who uses electronic bill payment services so you can set up an automatic payment and never be late again, which can help raise your credit score.  If you only pay the minimum due, you will still take years to pay off your balance, so make a plan to get those balances down and don’t use the card until you pay off what is owed.  Paying interest is a lost opportunity for being able to buy fun things you want.  Instead you get nothing for your money except a bill every month.  The best plan is to pay off your balance every month.  If you can’t do that, figure out why not.

People under 21 will now have to show proof of financial ability to make their payments or have a co-signer to get a card.  Let’s hope this rule helps a lot less college students and young people get in trouble with credit cards which damages their credit at a young age.  Plus you start out in life behind and never seem to get ahead.  Very sad way to start adulthood.  Financial responsibility goes a long way to helping you have a less stressful life.

There are needs (food, transportation, shelter) and wants (video games, top of the line mobile devices, name brand clothing) in life and wants will never be needs.  Too many people have been using credit cards to buy wants they can’t afford.  Maybe as a country these rules will help us individually get our priorities straight and we can tell Congress to get their spending priorities straight as well so that the next 3 generations aren’t bankrupted.  Not many of us, government included, have a pocket full of blank checks with endless resources to pay off debt.  But that’s another topic.