Friday, July 12, 2024

Scott Bilker
Household Math™: Home Equity vs. Credit Card
by Scott Bilker
 
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.

Test your knowledge by trying to solve this DebtSmart, Household Math™ problem! After you complete the problem, you’ll get the solution and explanation.
 

1.

Donna and Kyle need $10,000 to remodel their kitchen. They will be able to repay this in 12 months. Donna gets an offer on her credit card of 0% for 12 months with a $10,000 max and no fees. Kyle’s college buddy Vinnie, is a mortgage broker and tells Kyle that he can get him a home equity line of credit at the Prime rate, currently 4.25%, with no application charges or other fees. Kyle tells Vinnie that his wife has a 0% credit card offer and asks him which is better. Vinnie says that in their case the home equity line will have full tax benefits, however they would remain in the same tax bracket. Which option is better? The 0% credit card deal or the home-equity line of credit?

0% Credit Card Offer
4.25% Home Equity Loan
I don't know!






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