Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.
CHICAGO, April 14, 2021 (GLOBE NEWSWIRE) -- In times of crisis, repayment prioritization of credit products often provides a clearer view of how consumers are meeting the financial burdens they face. A new TransUnion (NYSE: TRU) Global Payment Hierarchy study found that the COVID-19 pandemic had a pronounced effect in a short period of time on how people paid their debts, particularly when faced with financial stress. In the United States, the changes were prominent across multiple credit products, with consumers clearly prioritizing their mortgage loan payments over auto loans and credit cards.
TransUnion has tracked payment hierarchy dynamics for more than a decade, including how these patterns changed in the U.S. following the Great Recession and in many other countries when they have encountered localized financial challenges, said Charlie Wise, head of global research and consulting at TransUnion. This study is unique in that it highlights how and why payment dynamics changed in different countries as a result of the COVID-19 pandemic a global crisis that has impacted consumers worldwide. These insights will better equip both financial institutions and consumers, fostering more trustworthy interactions between them as the world begins to normalize and recover from the pandemic.
Credit Cards v. Personal Loans What is the World Prioritizing?
TransUnion analyzed and compared trends for wallet profiles that are popular across the countries studied, including the United States, Canada, Colombia, India and South Africa. The study observed within each country those consumers with one or more credit cards and at least one personal loan, to identify if any changes took place in the payment hierarchy. To determine which credit product was prioritized over the other, TransUnion observed payment performance of the credit products over a 12-month time period, including whether or not one of the credit cards or personal loans went at least 30 days delinquent.
In the U.S., the study observed that personal loans were prioritized when consumers possessed multiple credit cards, though the gap between delinquency ratesindicating the degree of preferencenarrowed during the pandemic. Similar trends were seen in Canada and India, which suggests that credit cards took on increased importance during the pandemic and that consumers were more focused on keeping their cards in good standing by making timely payments.
A flip in the payment hierarchy happened during the pandemic in South Africa as credit cards were prioritized over personal loans, reversing the pre-pandemic hierarchy in favor of personal loans. Colombian credit usage showed no clear prioritization of either product until March 2020, when more value was placed on personal loans.
An interesting dynamic occurred in the U.S. and other countries wherein the payment hierarchy flipped for those consumers possessing only one credit card and at least one personal loan. In those cases, credit cards were prioritized during the pandemic, in contrast to the pre-pandemic preference for personal loans. In the U.S., this particular group comprised approximately 20% of the overall study population. This shift further demonstrates the increased importance of credit cards for consumers during the pandemic and the need to maintain access to this valuable source of credit. For those consumers with at least one credit card and at least one personal loan, on average, U.S. consumers possess three credit cards and one personal loan.
Personal Loans Mostly Prioritized Over Credit Cards
*30 or more day delinquency rate at 12 months for consumers who possess at least one credit card and personal loan.
But Dynamic Shifts if Consumers Only Possess One Credit Card
**30 or more day delinquency rate at 12 months for consumers who possess one credit card and personal loan.
Cash was clearly not king during the early parts of the pandemic. Millions of people opted to use their credit cards to make digital transactions from the safety of their home for groceries, clothes or other everyday items, said Matt Komos, TransUnions head of research and consulting in the U.S. If you only have one credit card and you were worried about visiting stores at the height of the pandemic, theres a strong likelihood you will preserve that card to continue spending and making digital transactions. If you possess three cards, though, its far more likely that you will go delinquent on one of them before you do so with a personal loan if you are facing financial hardship, as many consumers can continue to get by as long as they have access to at least one card.
These findings were corroborated by a global survey of 2,667 consumers who possessed credit products in Brazil, Canada, Colombia, Hong Kong, India, South Africa, the United Kingdom and the United States. Consumers across the globe recognized that there will be consequences if they miss at least one payment of any of their credit products. For instance, more than half (53%) of global respondents with a credit card said they expected to receive a call from their lender if they missed one payment.
The negative implication of a missed payment to a credit score was understood most by credit card and personal loan holders. Approximately 68% of credit card holders and 65% of consumers with personal loans said a consequence of a missed payment would result in a lower credit score. Comparatively, consumers with auto loans (55%) and mortgages (57%) were not as aware of this consequence.
Deeper Dive Into U.S. Payment Hierarchy Dynamics Shows Mortgage is Priority #1
In the U.S., TransUnion also conducted a payment hierarchy study focusing on the three most popular credit products in the country auto loans, credit cards and mortgages. Approximately 27.8 million consumers held all three loans as of Q3 2020, and mortgages were clearly prioritized over the other credit products. This dynamic has held true since Q4 2017.
The pandemic, though, has caused even greater prioritization of mortgages over the other credit products. For those consumers possessing auto loans, credit cards, and mortgages, the 30+ days past due delinquency rate at 12 months following observation was lowest for mortgages, at 0.75%, as of Q3 2020. Auto loans had the second lowest delinquency rate at 1.13%, followed by credit cards at 1.95%. This is very likely connected to the growth in home prices over the last several years as housing markets across the country have remained strong, and consumers desire to protect the equity in their homes. As well, as lockdowns and the shift to work/school from home permeated during the pandemic, keeping current on home loan payments took on increased importance in 2020.
Consumers Prioritizing Mortgages Above All Other Major Credit Products
**30+ days past due rate at 12 months for those borrowers possessing all three credit products.
Mortgage is once again the clear priority for U.S. borrowers, said Komos. The mantra, you cant drive your home to work doesnt have the same effect when millions of Americans are waking up, showering, eating breakfast and taking only a few steps to their home office.
In addition to more people working from home and rising home values, mortgage loan performance is likely benefitting from thousands of mortgage borrowers entering accommodation programs soon after the onset of the pandemic. The study points to both subprime and near prime credit risk mortgage borrowers benefitting the most from these programs as they were able to delay payments and maintain their accounts.
Similar to the global study comparing credit card and personal loan performance, prioritization of payments shifted if a consumer possessed only one card. Of the 27.8 million U.S. consumers in the study possessing an auto loan, credit card and mortgage, only 5.3 million people had one credit card in their wallet. For this subset of the population, mortgage remains the clear priority, but consumers with only one credit card valued it more than their auto loan beginning in Q2 2020. This shift suggests the heightened importance of maintaining access to at least one credit card as online commerce and digital transactions have become a daily necessity for many U.S. households.
Survey data highlight that U.S. consumers valued their mortgages over other loans because the credit product has the highest perceived value of all expenses. Furthermore, six in 10 U.S. consumers expected to receive a call from their lender if they missed one mortgage payment and more than half (52%) said their missed payment would have a negative impact to their credit score. Nearly one in five consumers (17%) said they would experience foreclosure or their home would be repossessed if they miss a mortgage payment.
The pandemic has changed so much in the world, but understanding why consumers are making important credit decisions only serves to better help the lending ecosystem in the future, concluded Komos.
To learn more about consumer payment prioritization shifts during the pandemic, register for TransUnions April 22 webinar here. For more information about TransUnions Global Payment Hierarchy Report, please click here.
About TransUnion (NYSE: TRU)TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.
A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.
http://www.transunion.com/business
Read more from the original source:
- MB Shuffle: X1N0 Places Self-Empowerment in the center of Superstar - More Branches - March 20th, 2024 [March 20th, 2024]
- Oops! I called my boss 'dude.' Career coaches weigh in on tricky ... - NPR - September 17th, 2023 [September 17th, 2023]
- Servant leadership and AI: Agility and empowerment for the CLO - Chief Learning Officer - September 17th, 2023 [September 17th, 2023]
- New Book You Were Born for More Offers a Transformative ... - Digital Journal - September 17th, 2023 [September 17th, 2023]
- New academic year, new faces on campus - Central Michigan University - September 17th, 2023 [September 17th, 2023]
- Vanilla perfumes: the 8 best and long-lasting - Marie Claire UK - September 17th, 2023 [September 17th, 2023]
- Now, CCTV cams must at coaching centres - Times of India - September 17th, 2023 [September 17th, 2023]
- What would have happened if Billie Jean King had lost to Bobby ... - The Boston Globe - September 17th, 2023 [September 17th, 2023]
- Discover the synergy between biotech and medtech in Ghent - Labiotech.eu - September 17th, 2023 [September 17th, 2023]
- Offtrack: The Long Road to Asylum for LGBTQ Refugees in Greece - Pulitzer Center on Crisis Reporting - September 17th, 2023 [September 17th, 2023]
- The rise of solo dates: Why Gen Zs are embracing 'Me Time' - Nairobi News - September 17th, 2023 [September 17th, 2023]
- Libra to Pisces: 4 Nurturing Zodiac Signs Who Prioritize the Needs ... - PINKVILLA - September 17th, 2023 [September 17th, 2023]
- 2023 Northwest Indiana Women's Leadership & Innovation Summit ... - Purdue University Northwest - September 17th, 2023 [September 17th, 2023]
- How Hinewehi Mohi uses te reo and music to bring Aotearoa together - New Zealand Herald - September 17th, 2023 [September 17th, 2023]
- The 20 Most Anticipated Sequel and Reboot Movies Coming in ... - MovieWeb - June 22nd, 2023 [June 22nd, 2023]
- What Taylor Swift teaches girls about taking control of their lives and ... - Morningstar - June 22nd, 2023 [June 22nd, 2023]
- Report Points To Growth Of Asian-American Businesses In ... - iHeart - June 22nd, 2023 [June 22nd, 2023]
- Empowering Women: A Day of Firearms and Firearm Safety | P ... - NewsBreak Original - June 22nd, 2023 [June 22nd, 2023]
- EMBRACING THE SPIRIT OF AFRICAPITALISM: CATALYSING ... - The Tony Elumelu Foundation - June 22nd, 2023 [June 22nd, 2023]
- The best albums of the year so far (2023) - The Vinyl Factory - June 22nd, 2023 [June 22nd, 2023]
- Benton County Sheriff's deputies train to help kids avoid bad situations - Westside Eagle Observer - May 14th, 2023 [May 14th, 2023]
- Too Much Seduction: How to stay pure in a culture that glorifies sex, lust, lewdness - EEW Magazine - May 14th, 2023 [May 14th, 2023]
- The House of Doors by Tan Twan Eng review tragedy in the tropics - The Guardian - May 14th, 2023 [May 14th, 2023]
- More Than Just A Game How Dungeons And Dragons Is Making ... - IFLScience - May 14th, 2023 [May 14th, 2023]
- GoodHeart | 25-y-o Leneka Rhoden is a beacon of service and ... - Jamaica Gleaner - May 14th, 2023 [May 14th, 2023]
- FemTech: technology empowering women's health and well-being - Lexology - May 14th, 2023 [May 14th, 2023]
- NBA Foundation: Uplifting Memphis youth through music - NBA.com - May 14th, 2023 [May 14th, 2023]
- Greek film 'Behind The Haystacks' to be featured at Sydney Film ... - Neos Kosmos - May 14th, 2023 [May 14th, 2023]
- Grants approved for groups in Wellington North exceed budget - Wellington Advertiser - May 14th, 2023 [May 14th, 2023]
- Self-Empowerment: 7 Ways to Empower Yourself | Maryville Online - March 4th, 2023 [March 4th, 2023]
- When you take all that we encompass and the drive that we have, it's ... - March 4th, 2023 [March 4th, 2023]
- Code of Ethics: English - National Association of Social Workers - October 25th, 2022 [October 25th, 2022]
- All children deserve arts and music programs in schools, thats why Prop. 28 should be approved - San Bernardino County Sun - October 13th, 2022 [October 13th, 2022]
- The Body Positive Sex Talk Empowering Women On TikTok - Women's Health - October 13th, 2022 [October 13th, 2022]
- TCL Announces Exciting Collaboration with TCL Brand Ambassador Shyla Heal to Elevate #TCLForHer Platform and Inspire Women to Redefine Greatness -... - October 13th, 2022 [October 13th, 2022]
- The good employer: Creating and living-out a culture of empathy, empowerment and understanding - Digital Journal - October 13th, 2022 [October 13th, 2022]
- International Day of The Girl: Rotary District 9125 Empowers 850 School Girls In Kano THE AUTHORITY NEWS - THE AUTHORITY NEWS - October 13th, 2022 [October 13th, 2022]
- MEET THE CANDIDATES: Charleswood-Westwood-Tuxedo - Winnipeg Sun - October 13th, 2022 [October 13th, 2022]
- Ruth Radelet (ex Chromatics) discusses the inspirations behind her debut solo EP - Brooklyn Vegan - October 13th, 2022 [October 13th, 2022]
- Here to stay! How this OG Tagaytay wellness spa survived the pandemic, is stronger than ever - Rappler - October 13th, 2022 [October 13th, 2022]
- Washtenaw County Board of Commissioners Set to Consider $3.2M in Awards to Local Organizations as Part of the Community Priority Fund -... - October 13th, 2022 [October 13th, 2022]
- FEMALE INCLUSION AND EMPOWERMENT CONFERENCE SPEAKERS - News - htafc.com - October 13th, 2022 [October 13th, 2022]
- Graphic designer works his way to the top - The Herald - October 13th, 2022 [October 13th, 2022]
- Foundation coaches in Tanzania attend in-person training sessions - Real Madrid - October 6th, 2022 [October 6th, 2022]
- Jade Helliwell releases first EP since 2018 in upbeat celebration of women - Music Talkers - October 6th, 2022 [October 6th, 2022]
- Competing interests: protection of transgender rights and freedom of religious beliefs - the Australian perspective - Kennedys - Kennedys Law - October 6th, 2022 [October 6th, 2022]
- Adam Levine and The Try Guys: Cheating scandals hit different right now - Vox.com - October 6th, 2022 [October 6th, 2022]
- Championing the value of time and a future-proof healthcare plan for women - Malaysiakini - October 6th, 2022 [October 6th, 2022]
- Seattle Rep Announces October Programming Featuring WHAT THE CONSTITUTION MEANS TO ME & More - Broadway World - October 6th, 2022 [October 6th, 2022]
- Who are the actors playing Martin Luther King and Malcolm X? - New York Daily News - September 29th, 2022 [September 29th, 2022]
- "One Of A Million" by Softcult - Northern Transmissions - September 29th, 2022 [September 29th, 2022]
- Aesthetic Gynaecology and Regenerative Medicine Training held in Delhi by IASRM (International Association of Stemcell and Regenerative Medicine) -... - September 29th, 2022 [September 29th, 2022]
- 6 Teens Who Make The World A Better Place - Forbes - September 29th, 2022 [September 29th, 2022]
- Earn Your Leisure Partners with Steve Harvey to Assemble an All-Star Financial Lineup for Innovative Festival at London's Historic Royal Albert Hall -... - September 29th, 2022 [September 29th, 2022]
- KNUST-Obuasi campus honours Dr. Love Konadu and 25 others - BusinessGhana - September 29th, 2022 [September 29th, 2022]
- Back-to-the-office moves leave tech uneasy - Axios - September 7th, 2022 [September 7th, 2022]
- FEMALE INCLUSION AND EMPOWERMENT CONFERENCE - News - htafc.com - September 7th, 2022 [September 7th, 2022]
- Neustar and LiveVox Join Forces to Improve Outbound Customer Contactability - Business Wire - September 7th, 2022 [September 7th, 2022]
- 5 Organisations We've Teamed Up With to Empower Africa's Young People - Global Citizen - September 7th, 2022 [September 7th, 2022]
- What is Witchcore? The Aesthetic Gaining Popularity on Social Media, Explained - The Mary Sue - September 7th, 2022 [September 7th, 2022]
- After 10 years of swiping right, what have we gained from Tinder? - Sydney Morning Herald - September 7th, 2022 [September 7th, 2022]
- Sisters of the revolution: the women of the Black Panther party - The Guardian - September 7th, 2022 [September 7th, 2022]
- ANALYSIS | Only SAs elite benefits from black economic empowerment and Covid-19 proved it - News24 - September 7th, 2022 [September 7th, 2022]
- 'We need to be aware of the power of touch' - Nursing Times - September 7th, 2022 [September 7th, 2022]
- Students reminded of University resources to support mental health and wellness - Pennsylvania State University - September 7th, 2022 [September 7th, 2022]
- Boudoir photographer Amanda Robb helps 'terrified' women love their bodies - Stuff - September 7th, 2022 [September 7th, 2022]
- Super Girl Surf Pro returning to Oceanside with global surf stars like Bethany Hamilton and a music festival - The San Diego Union-Tribune - September 7th, 2022 [September 7th, 2022]
- 5 Business Experts to Learn from in 2022 - The Australian Business Journal - September 7th, 2022 [September 7th, 2022]
- Stealthy state crimes during times of disaster - Mail and Guardian - September 7th, 2022 [September 7th, 2022]
- Neha Mujawdiyas Personal Journey In Accessing Basic Education Inspired Her Startup - SheThePeople - September 7th, 2022 [September 7th, 2022]
- The Experience of Pregnant Women in the Health Management Model of Int | IJWH - Dove Medical Press - September 7th, 2022 [September 7th, 2022]
- Men are more prone to suicide than women, reveals NCRB data - The New Indian Express - September 7th, 2022 [September 7th, 2022]
- 25 Empowerment Anthems: Songs for an Extra Boost of Confidence - Billboard - August 15th, 2022 [August 15th, 2022]
- 40 years later, business of healthcare changed in very personal ways PharmaLive - PharmaLive - August 15th, 2022 [August 15th, 2022]
- Setting boundaries in your daily life can protect you from 'harmful experiences': Here are 3 tips to get you started - CNBC - August 15th, 2022 [August 15th, 2022]
- I Tested PUMA's New Frida Kahlo Collection Honoring the Iconic's Legacy - mit - August 15th, 2022 [August 15th, 2022]
- The Activist Offering: Lessons from Kansas - Progressive.org - Progressive.org - August 15th, 2022 [August 15th, 2022]
- 'The Majnu Ka Tilla Diaries' Reveals Tibetan Empowerment in India - The Wire - August 15th, 2022 [August 15th, 2022]
- Kentwood Players announces open auditions for 9 TO 5 the Musical - Culver City Observer - August 15th, 2022 [August 15th, 2022]
- 'They/Them' Review: A Slasher That Isn't as Scary or Subversive as Real Life - CNET - August 15th, 2022 [August 15th, 2022]