Which is better: $50k HELOC or $50k credit card?

Yahoo

2 days ago

If you've got a big, five-figure expense coming up – maybe a home renovation or a medical bill – you may be staring down two options: a HELOC (home equity line of credit) and a high-end credit card.
Both are types of revolving, or open-ended credit, meaning you can borrow funds from them, pay back, and borrow again – at a variable interest rate. Right now, with HELOC rates at their lowest levels in months and credit card rates holding close to a record high, the home equity product would seem to have the edge. But there are other considerations, ranging from your credit score to your need for the funds.
So, let's parse the differences between a $50,000 HELOC or a $50,000 credit card: their features, their real costs, and when one might be better than the other.
How does a HELOC work?
A HELOC is essentially a line of credit backed by the equity in your home. The size of your credit line is based primarily on the size of your homeownership stake, along with your income and credit score. Generally, though HELOCs come in considerable amounts. For example, Bank of America, a leading lender, offers HELOCs of a minimum of $25,000 up to a maximum of $1 million.
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'A HELOC is similar to a credit card in that you can draw what you need, as you need, up to the limit your lender sets,' says Kyle Enright, president of California-based home equity lender Achieve. 'And, like a credit card, you pay interest just on what you've used.'
However, while a HELOC starts out behaving like a credit card, it eventually turns into a loan. You can withdraw funds for a set period (typically 5 to 10 years). Then, you pay back interest and principal in the repayment period (usually 10 to 20 years).
Advantages of HELOCs
Borrowers typically open HELOCs to finance large home renovations or projects. However, they can be used for almost anything – including, ironically, paying off high-interest credit card debt. Their main benefits include:
Lower interest rates: As of mid-2025, average HELOC rates run in a range of 4.99 percent to 12.25 percent – their lowest levels in months, according to Bankrate's weekly survey of lenders. That is well below most credit card APRs and personal loan rates.
High borrowing limits: HELOCs are serious money loans. The average credit line limit is almost $150,000. Last year, the average HELOC balance was over $45,000, according to Experian.
Potential tax deduction: Interest may be deductible if used for home improvements (check the details with a tax pro).
Ability to freeze interest rate: Many HELOC lenders let you lock in the rate on all or a portion of your balance, so you pay interest at a fixed rate, rather than the usual fluctuating one.
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Disadvantages of HELOCs
HELOCs do have their downsides, of course. The biggest one: Your home acts as collateral for the debt. That means borrowers 'risk foreclosure should payments not be made regularly,' says Chris Parks, loan officer at Churchill Mortgage, a home equity loan lender based in Tennessee.
Aside from the danger of losing your home, HELOC disadvantages include:
Upfront expenses: HELOCs often come with application fees, appraisal fees and other closing costs; these can amount to as much as 5 percent of your credit line, or hundreds of dollars, to be paid out-of-pocket.
Slow funding: Since it's a type of mortgage, applying for a HELOC can be a lengthy, month-long process.
Limited access window: Once the draw period ends, you can no longer borrow funds. So the clock is ticking when it comes to using the HELOC.
Sudden jump in payments: Many HELOCs let you pay back just interest during the draw period (similar to the minimum payment on a credit card). Unfortunately, 'interest-only payments will not move the needle very quickly,' in terms of your overall debt, as Parks says. Result: a big jump in your monthly bill – which will include paying back principal – when the repayment period begins.
How does a high-end credit card work?
With high-end or premium credit cards, it's not unheard of to have limits of $100,000 or more. The thing is, getting one can be a bit of a mystery: You can't shop for a card with a specific balance, because lenders typically don't disclose your credit limit until after you apply and are approved. And, while your credit score and annual income are the chief factors in getting approved, card issuers typically don't disclose requirements for those either. That said, travel-oriented cards and rewards-oriented cards tend to offer these larger credit lines.
Advantages of credit cards
Credit cards are completely open-ended and ongoing — as long as you make minimum payments, you can handle repayment on your own schedule. In addition:
Quicker access: It's typically a faster and easier process to be approved for a credit card, as it requires less financial documentation than a HELOC.
No collateral: Credit cards are unsecured. So you aren't at risk of losing your home, as with a HELOC.
Rewards and cash-back: These cards offer a long list of perks, like travel and dining credits, as well as luxury hotel benefits. You can earn cash back at a generous clip, too.
Intro 0% APR offers: Some premium cards offer 12–21 months of zero interest charges on purchases or balance transfers. HELOCs, at best, offer an introductory interest rate a few points lower than prevailing rates – for 6-12 months.
Disadvantages of credit cards
Everything about a premium credit card is high – and that includes the cost of carrying a balance on it. 'You're never going to see a [premium] credit card that has a rate lower than 15 to 18 percent,' says Benet Wilson, lead credit card writer at Bankrate. And those terms are for people with extremely strong credit scores. In general, the premium cards' interest rates range from 19 to 30 percent.
Here are some other reasons you may want to think twice before you swipe:
Temptation to overspend: A large credit limit and ongoing term can encourage unnecessary purchases, leading to unmanageable debt.
Annual fees: Premium perks come at a price. HELOC annual fees can range from $5 to $250, while fees for a high-end card can easily cost double that, even reaching into the four figures. The Chase Sapphire Reserve, one of the most popular high-tier cards, charges a $795 annual fee, for example.
Credit score requirements: You need a near-perfect credit score in the 800s to be approved. A 740 is often the rock-bottom minimum.
Impact of missed payments: 'The credit card may not be able to foreclose on your house, but they can make life difficult with liens or garnishments,' says Parks.
Bankrate's take: HELOC rates, currently averaging 8.12 percent, have been declining since autumn 2024. In contrast, average credit card rates — over 20 percent currently — are holding close to a record high.
HELOCs vs. high-end credit cards
Feature
HELOC
High-End Credit Card
APR
4.99%–12.25%
15%–26%
Annual Fee
$5–$250
$0–$795+
Approval Speed
Weeks
Hours (sometimes minutes)
Collateral
Your home
None
Funds Availability
5–10 years
No time limit
Rewards
None
Points, miles, cash-back
Tax Deductible Interest
Possibly for home improvements
No
Closing Costs
1%-5% of total loan amount
None
Risk
Foreclosure if unpaid
Credit damage if unpaid
HELOC vs. credit card: How much would each cost per month?
Let's put the $50,000 in perspective by looking at how much HELOCs and credit cards would cost monthly and over time.
HELOC scenario: Suppose you take out a $50,000 HELOC at 9 percent APR. If you only made interest payments during the 10-year draw period, your monthly payment would be $375. Once the repayment period begins (assuming it also lasts 10 years), the amount jumps to nearly $640. Over the full 20 years, you'd pay roughly $26,800 in interest.
Credit card scenario: Now, imagine putting that same $50,000 balance on a credit card with a 22 percent APR. If you only make the 3 percent minimum payment (about $1,500 to start), that could take decades to pay off. Over time, the interest could cost you over $91,000, nearly triple the amount you borrowed.
The impact on credit scores
Credit agencies treat HELOCs and credit cards differently when calculating your credit score.
A HELOC is generally considered a type of installment loan, which means credit scoring models focus primarily on whether you make your payments on time rather than how much of the available credit you're using.
On the other hand, credit cards are a type of revolving debt and credit utilization ratio plays a bigger role. 'The credit card is not friendly to your credit if you are carrying higher balances,' says Parks. 'Any time you're running balance is over 50 percent used on the credit card, it will affect your credit.' For those aiming for a high score, utilization at 10 percent or below is ideal.
Final word on $50K HELOC vs. $50K credit card
There's no one clear winner in the $50K HELOC vs. $50K credit card debate. The HELOC will almost always be cheaper, in terms of borrowing costs. And it's arguably less of a burden on your credit report. 'I'm not sure I would even use a card with a $50,000 limit as a replacement for a HELOC,' says Wilson. 'I wouldn't risk taking on a card with 20-plus percent interest at a $50,000 limit. As that debt can pile up, it can hurt your credit score and your credit utilization.'
That said, a HELOC takes longer to get, and puts your home on the line. And it requires a significant equity stake to qualify. If you lack one, but have a high credit score and income – and have the self-discipline to pay off your balance – a high-limit credit card could be the better move. Plus, it won't 'expire' the way a HELOC will.
'Caution should be used with each,' Parks advises. 'Either option has a strategic value, but also carries an equally heavy risk.'