Paying credit cards before a mortgage? What???

By glblguy

I work in IT for a bank. During our monthly team meetings, we often have guest speakers from different areas of the bank come and talk to us about their area. One of our recent speakers was from our credit card division. While not a fan of credit cards, learning about the business model was interesting. The amount of profit and high level of default rates was plain scary. The one quote that caught my attention was “Credit cards have become such an important financial tool, that people are now paying their credit cards before their mortgage“. My first reaction was that I didn’t hear what she said correctly which was immediately followed with a resounding mental “WHAT???”. I wrote the quote down along with the question “Why??”. Rather than interrupt the presentation, I decided to follow up with her afterward.

Her reply to my “What???” was rather interesting. The bank itself was even curious as to why this was occurring and did some informal polls. The reason is that many people are literally living off their credit cards, so they pay them first to be able to sustain themselves for the next month.

Why paying credit cards before your mortgage is a really bad idea

I’m not sure what’s happened with the American economy and America’s view on spending to cause people to change their priorities, but paying your credit card first is a really bad idea. Payment priorities should be life basics first, everything else second.

Life basics should always, in every situation, be your primary focus. Don’t have enough money to pay all of your bills? Do your life basics first, everything else second.  Frugal Dad wrote about this very topic recently. He worked for a credit card company, and shared some insights on the bully tactics they use to scare you. Don’t let them scare you and don’t let them bully you. Take care of your needs first, and as Frugal Dad says “If you have money left over after paying those four basic categories, then by all means make your credit card payment minimums.

Get control of those cards

Once you have your payment priorities in order, it’s time to break that credit card cycle:

  1. Cut up all of your cards but one.  While you may think you need them, you really don’t.
  2. Begin building a baby emergency fund. $500 – $1000 dollars depending on your needs.
  3. Create a budget, and significantly trim back on your expenses. Nothing in this world is free, and getting out of debt is not exception.  Also, look for opportunities to increase your income as well. Maybe start a few online stores.
  4. Start a debt snowball and pay against those cards like crazy. Just wait until you pay one off, the feeling is great!

Credit cards not required

Contrary to popular belief, credit cards aren’t required, nor should they be the norm. Debit cards work just as well. Don’t believe me? Give it a try. If you are struggling with irresponsible credit card use, put your cards up for a month and live without them. I haven’t used a credit card once in 2 years and haven’t missed them one bit. I’m still paying on them, but each time I make a payment I feel a little more free, a little more load off my back.

If you are struggling with credit card debt and/or putting credit card payments first, I challenge you to do the same.

Photo by: kalleboo

23 Responses (including trackbacks) to “Paying credit cards before a mortgage? What???”

  1. plonkee Says:

    This saddens, but doesn’t surprise me. Credit card companies often shout the loudest, so people pay them before the mortgage. But really, and truly, you need to make sure you aren’t evicted so you should always pay for housing first. In the UK, although utilities companies can send debts into collections (and eventually make you bankrupt) they can’t cut you off – they’ll force you to use pre-pay instead, so that’s not too bad. But, if you don’t pay the mortage/rent you could end up homeless. Not good.

  2. Laura Says:

    This is insane! Paying credit cards before mortgages is a horrible choice. I didn’t realize how big a trend this was. Thanks for sharing your findings.

  3. jim of Blueprint for Financial Prosperity Says:

    You’re on point with this article with one exception, debit cards are far more dangerous than credit cards because they’re explicitly linked to you checking account. One miskeyed transaction, one incident of fraud and you can have trickle down effects that drastically affect your finances.

  4. Savings Toolbox Says:

    Sad that people feel threatened by anyone in connection with their debt. It’s such scare tactics that help people make the wrong decisions about their financial welfare.

    Agreed that debit cards are a more plausible alternative than to credit cards. People need to learn how to live within their means – something that is easily overlooked when using a credit card. The card limit does not always reflect a person’s true financial means and this is where many people get in trouble.

    Having not used a credit card in more than 5 years does make me feel the pinch every now and then but I also am confident that I am getting ahead using only the cash that is in my budget and that is available.

  5. Kristen Says:

    I haven’t used a credit card in over two years. It was really hard at first, but I had racked up a lot of debt, and I knew I just had to stop. I do rely heavily on my debit card. As another poster mentioned, you do have to be careful so that you don’t overdraw your account.

    Bullying tactics from debt collectors in general are becoming more common place. I work for a credit counseling agency. We actually had a client who called in a panic because a collector told her the police were outside of her house and would arrest her if she didn’t immediately make a payment. Not only was that untrue, but it is illegal for them to do that. People should check out the Fair Debt Collection Practices Act at if they have questions about the legality of a collectors tactics. They should also report illegal behavior by the collector to the BBB and their state attorney general.

  6. Miranda Says:

    I agree, @jim. I just had a rather horrifying experience in which a bank error resulted in a chain of events that led to a “negative” account balance, my debit card being put on hold, and me standing there, denied, looking extremely stupid and feeling rather embarrassed. Another thing to consider is that more credit cards have liability limits for fraud and theft than do debit cards, although things are getting better in this area.

    The key to wise credit card use is paying off the balance every month, and not buying what you can’t pay for anyway. And I certainly agree that paying your mortgage should come before paying anything else.

  7. Pinyo Says:

    Could this be another one of those marketing tactic dreamt up by the credit card companies? Look, your peers think paying credit cards is more important, so should you. :-)

  8. "Mo" Money Says:

    I had read this in another venue, and I couldn’t believe it, but I do believe it to be true. People are living on their credit cards and they are paying on the cards before making their mortgage payments. Incredible!

  9. Melissa Says:

    Check your green statement in the middle of the article, you say

    Why paying your mortgage before credit cards is a really bad idea

    When I’m sure what you’re saying is exactly the opposite. But people reading this will focus on the dark, large print and think you’re saying we should pay the credit cards first.

  10. Malachi 3:10 Says:

    I paid off 16K in 5 months (credit cards). Additionally, I shed a 13K car loan. I am now debt free and building my 3-6 months emergency fund. What a feeling of relief this is…

  11. Mrs. Micah Says:

    Wow. On the one hand, it makes sense. People are living off credit so they need that to continue. But except for food, shelter is more important than anything else they could be buying. And if times are that hard, a food bank or food pantry might help them get back on their feet and regroup. CC companies can hurt your credit score, but if you keep paying your mortgage then I don’t believe the bank can foreclose.

  12. glblguy Says:

    Type fixed, thanks for the heads-up everyone.

    @Jim – While I agree there may be some risk with debit cards, for someone who has problems with credit card use, keeping credit cards isn’t the best idea. That was the case for me, I’d rather run the risk of having to deal with the bank and overdrafts than risk falling into credit card temptation again.

  13. Steward Says:

    I can’t believe that people would do something like this. I guess our minds just don’t handle information very well in certain situations. It is the only reasonable explanation that I can think of that doesn’t just assume that the person is a complete moron (because so many people can’t be that stupid, it just can’t be so …).

  14. thinkingthing Says:

    If you want to live off a debit card, set up a free checking account SEPARATE from the checking account that receives your direct deposits. Some banks waive the minimum balance if you set up the account online. Make sure that they turn off the stinky overdraw protection service – it defeats the purpose of using the account to cap your discretionary spending.

    Set up an automatic weekly transfer to the account – make sure it’s a realistic amount or you’ll ALWAYS go back to using the cards. You’re on a diet, if you starve yourself, you won’t be able to maintain it.

    After this, it’s just a matter of will power. With your budgeted allowance being transfered automatically to the debit card, you have no excuse for using credit cards, using the earmarked funds in your main checking account, or rerouting funds from your savings plan. And staying in the black is as easy as using the debit card for all discretionary purchases.

  15. My Daily Dollars Says:

    Thanks for sharing this story. How awful that people feel the pressure to pay thier credit cards before their mortgage! Your tips are great; I agree that you can certainly get by with only a debit card. It’s tough at first, but the feeling IS awesome once you get control of your finances.

  16. Louie Says:

    It makes no sense to pay of your credit cards before your mortgage. I agree you should keep at least one credit card for emergencies especially with all these 0 apr for a year deals, you just have to show restraint!

  17. Dan Ray Says:

    My site,, heard about this phenomena anecdotally last year, so we hired GfK Roper to do a scientific poll on the topic. The major findings include:
    • More than half of the nation (54 percent) say they would pay their mortgage payment first. Making sure the home remains livable by paying utility bills ran second at 34 percent.
    • Just 6 percent said they would pay the credit card bill first if they were falling behind financially. Nearly two-thirds (64 percent) say they’d put off paying credit cards even if it meant losing them.
    • A measly 3 percent would think to put off paying a mortgage if it meant losing it.
    That was in September of ’07. I think I’ll re-run that poll. Since the economy has turned from troubled to in-crisis since then, the answers may be different.

  18. Jason Says:

    paying credit cards instead of mortgage for me enabled a loan modification, and allowed me to keep my credit, now everyone will get paid in full (minus lower interest on the mortgage)

    Don’t assume people do this because they are uneducated, in fact I would guess that people do this because they are looking out for their own best financial interest, which is what they should be doing.