Friday, March 7, 2008

Heck no to HELOC cards

Have you somehow been able to build up some of that nasty equity in your home through hard work, thrift and paying your bills on time?  Also happen to have a HELOC (home equity line of credit) on your home to allow you to tap the equity for emergency purposes, college loans or something similarly worthwhile?

Leave it to the credit card industry to figure out a way to add plastic to that unholy (for them) situation.  According to CardTrack, there's an interesting credit product that's now available that ties a credit card to your HELOC.  The "good" folks at Harris bank have made a product available that lets you use a credit card to tap into your HELOC.

That's right.  Liquidate your equity with lattes.  Grind your net worth as you gas up.  Destroy as you dine.  You get the drift.

Let's be clear here.  If you tap your home equity in today's market, i.e. declining home values, EXCEPT IN VERY DIRE CIRCUMSTANCES, you need to have your head examined.
Consider this--what happens if you tap the HELOC you set up a couple of years ago when your home was worth $10 or $20K more than it is now.  Then something happens like, oh, losing your job?  Suddenly, you need to get rid of the house and downsize.  (Because you'll do that instead of living off credit cards, right dear reader?)  

Oops.  You're now upside down and bankrupt before you know it.

Think maxing out your HELOC is a good idea?  Just remember this--if the credit card issuers thought of it, somebody's getting the shaft.  Oh, and it ain't them.

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