Why you should use a HELOC instead of a credit card now

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Opting for a HELOC over a credit card makes a lot of sense in today’s rate environment. DAVID BENITO/Getty Images
The high-rate landscape hasn’t been particularly friendly to borrowers over the last couple of years. Until recently, the federal funds rate remained stuck at a 23-year high, making it tough to find good, affordable borrowing options. But inflation has cooled significantly in recent months and the Federal Reserve made its first rate cut in four years late last month. That, in turn, has pushed down rates on certain lending products and helped to ease some of the burden on borrowers.
As a result, borrowers may currently have a wider pool of borrowing options to choose from — and two of the more popular choices right now are credit cards and home equity lines of credit (HELOCs). Both of these options offer borrowers access to a line of credit that can be borrowed from, repaid and then used again up to the credit limit, giving them more flexibility than they’d get with a lump-sum personal loan or home equity loan.
But despite their similarities, a HELOC is likely the better choice for most borrowers right now. Below, we’ll why.
See what HELOC interest rate you could secure here.
Why you should use a HELOC instead of a credit card now
If you’re a homeowner with equity in your home, you may want to opt for a HELOC over a credit card today for the following reasons:
HELOC rates are sitting at 52-week lows
One of the most compelling reasons to use a HELOC over a credit card is the current state of interest rates. This week, the average HELOC rate dropped to 8.73%, which is the lowest it has been in over a year. This 20-basis-point decline is largely due to the Federal Reserve’s decision to cut interest rates in late September. Since HELOC rates are closely tied to the Federal Reserve’s rate decisions, they often reflect any cuts or increases more quickly than other types of loans. For homeowners who are looking to borrow, this is an opportune time to take advantage of these lower rates.
In contrast, credit card interest rates have soared to record highs, with the average rate now sitting at a staggering 23%. This is a massive difference when compared to the rates available on HELOCs. So, if you’re facing a major expense or considering consolidating your credit card debt, tapping into a HELOC at these low rates can result in substantial savings over time compared to using a credit card.
Find out how affordable a HELOC could be today.
Home equity levels are at an all-time high
Another reason to consider using a HELOC instead of a credit card is the substantial amount of home equity that many homeowners have built up. Right now, the average homeowner’s equity stake is sitting at an all-time high of $327,000. This is a notable increase of about $28,000 compared to earlier in the year. This growth in home values means that many homeowners now have more financial flexibility, with the ability to tap into their home’s equity at favorable rates.
When it comes to accessible equity — the amount you can borrow against while still maintaining a healthy 20% equity cushion — the average homeowner now has $214,000 available. This is an 11% increase compared to earlier in 2024, offering significant borrowing potential for those who need to finance large expenses or consolidate higher-interest debt. Tapping into this equity via a HELOC allows you to borrow at a much lower rate than what credit cards offer, making it a smarter option for managing debt or funding major projects.
HELOC rates automatically adjust over time
Another advantage of using a HELOC instead of a credit card is that HELOC rates are variable and can adjust with future rate cuts. The Federal Reserve is widely expected to cut rates again in both November and December and possibly further into 2025. This means that if you take out a HELOC now, your interest rate could drop even further in time, making it an even more attractive option for borrowing. So while a variable rate might seem risky at first glance, the current economic climate suggests that borrowing costs will continue to decline, letting you lock in lower rates as they happen.
Credit card rates, on the other hand, tend to remain high regardless of what happens with the Federal Reserve, as they’re driven primarily by the prime rate. So even if the Fed continues to lower rates, you’re unlikely to see a major reduction in your credit card interest rate. This makes credit card debt far more expensive in the long run, with fewer opportunities to reduce your interest burden. By contrast, a HELOC offers flexibility and the potential for lower rates in the future, which can make a big difference when managing large sums of debt or financing significant expenses.
The bottom line
With HELOC rates at 52-week lows and credit card rates at record highs, now is an ideal time to consider switching from using a credit card debt to a HELOC. Not only will you benefit from much lower interest rates, but you’ll also have the potential to take advantage of future rate cuts, making a HELOC a smarter and more cost-effective financial tool in the current economic environment.