By Kathy Chu, USA TODAY
Seven years in the credit-counseling business didn't prepare Ann Estes for the alarming trend she began noticing last fall:
As her clients' mortgage bills became unaffordable, a growing number of them began paying their credit card bills before
— and sometimes instead of — their mortgages.
"We've never seen anything like this," says Estes, who counsels clients by phone from her office in Richmond, Va. "Their
homes are at risk, and they know it. But people say, 'I don't want to let my credit cards go because that's my cash flow.' "
CHART: Changes in spending habits
Across the nation, credit counselors are reporting the same trend. Credit bureau analyses of consumer payment data
show that financially squeezed borrowers have begun paying their credit card and car bills before their mortgages. That's
a striking reversal from the norm, one that reflects rising desperation. It suggests that some people essentially have given
up trying to stay current with their mortgages and instead are focused on using credit cards to squeak by.
If the trend persists, many economists say, it could accelerate mortgage losses and further drag down the economy.
Rising living costs, along with cheap and plentiful credit, have led consumers to rely more on plastic to pay for necessities
they can't live without — and luxuries they don't want to do without. But as the economy weakens, consumers are starting
to spend less on discretionary items, such as furniture and electronics, and more on such necessities as groceries and
gas, according to government data. Such items increasingly are showing up on credit card bills.
"Everything's going up — dairy, gas, home taxes," says Christie Carlson, 34, a single mother of five children, ages 5 to 14,
in Tomah, Wis., who enrolled in a debt-management program after racking up $20,000 in card debt. "I'm trying to pay
more for everything in cash, but it's just impossible. It's not feasible right now to stop spending on the credit card."
During the past year, cred