While both sources of financing – home equity lines of credit and credit cards – are revolving, or open-ended, and therefore can be used for the same types of expenses, it is important to know the differences between them so you can use them as wisely as possible.

Similarities The similarities between home equity lines of credit and credit cards include:

-They are open-ended. With both home equity lines of credit and credit cards, you have ongoing access to your funds. Therefore, you can use both of them to finance ongoing expenses.

-They have special rates. Both credit cards and home equity lines of credit can offer low introductory rates.

-They have variable interest rates. On most credit cards and all HELOCs, the interest that you have to pay is variable. That means that it is tied to a specific index; in most cases the prime rate is used. When the prime drops, your interest rate drops, and when it goes up, the rate goes up.

-They have card offers. Obviously, when you have a credit card, it is the medium through which you access your credit. Similarly, with a home equity lines of credit, you have the option of getting a card to access your line of credit.

Differences Following are some of the differences between home equity lines of credit and credit cards:

-Limitations. Most HELOCs have a specific period in which funds can be accessed, whereas credit cards do not.

-The level of interest rates. The interest rates on home equity lines of credit are typically lower than those on credit cards after any introductory period.

-Tax benefits. The interest on a home equity lines of credit is usually tax-deductible, whereas that on a credit card is usually not.