HELOC vs. Credit Card: How They Work, Key Differences, and When to Use Each

If you need to borrow money and you’re trying to decide between a HELOC vs. a credit card, you should consider several points. For example, a HELOC is best for large expenses you might need to finance over a period of time—home renovations, for example. A credit card, especially one with an introductory 0% rate, is better for smaller, one-time purchases.

There’s also a third option that essentially combines the two—Aven’s home equity-backed credit card.

We’ll dive into all of these options, and take a deep look at how HELOCs and credit cards compare, so you can make the best choice for your needs.

Table of Contents

1. How does a HELOC work?
   1. Pros and cons of a HELOC
2. How does a credit card work?
   1. Pros and cons of a credit card
   2. 0% interest credit cards
   3. Can you get a 0% interest HELOC?
3. HELOC vs. credit cards
   1. Aven HELOC card: an equity-backed credit card
4. When is a HELOC the better option?
5. When is a credit card the better option?
6. FAQ

How does a HELOC work?

A home equity line of credit (HELOC) is a revolving credit line that lets you borrow against the equity you’ve built in your home. You’re approved for a maximum credit limit, and during the draw period—usually 5 to 10 years—you can borrow from the line as needed. Some lenders allow you to repay and re-borrow repeatedly during this time.

HELOCs typically have variable interest rates, which means your rate can change over time based on market conditions. However, some lenders offer the option to lock in a fixed rate on individual draws, giving you more control over your repayment terms.

During the draw period, you often make interest-only payments, which keeps monthly costs low. Once the draw period ends, the HELOC enters the repayment period, which may last 10 to 20 years. At that point, you can no longer borrow from the line and must begin repaying both principal and interest through fixed monthly payments.

Because your home serves as collateral, failing to repay a HELOC could put your home at risk—so it’s important to borrow responsibly and plan for repayment.

Pros and cons of a HELOC

Here are the pros and cons of choosing a HELOC over a credit card.

Pros

• Low interest rates

  HELOCS tend to have lower interest rates on average than credit cards.

• High borrowing limits

  Depending on the amount of equity in your home and the lender you choose, you might be able to borrow more than you can with credit cards.

• Tax benefits

  If you meet certain qualifications, the IRS will allow you to deduct HELOC interest costs on your taxes.

• Use funds for anything

  You can use your HELOC for anything, from medical bills to college expenses and beyond.

• Low initial payments

  Your payments during the initial draw period are usually interest-only, meaning your payments for the first few years can be more manageable than credit card payments.

Cons

• Secured loan

  Because the collateral for a HELOC is the equity in your home, lenders can foreclose on your home if you cannot make payments.

• Long approval process

  Getting approved for a HELOC is a multistep process that can take several weeks, which is a negative if you need to access cash right away.

How does a credit card work?

A credit card is a form of revolving credit that allows you to borrow money for purchases up to a preset credit limit. Each month, you’re required to make at least a minimum payment, but you can carry a balance forward if you don’t pay the full amount.

Credit cards are unsecured, meaning they don’t require collateral. Because of this, they typically come with higher interest rates—the average rate was over 21% as of August 2024, according to the Federal Reserve.

You can avoid interest charges entirely by paying your full balance by the due date each month. However, if you carry a balance, interest will accrue on the unpaid portion, and those charges can add up quickly.

Credit cards are widely accepted and convenient for everyday spending, but their high interest rates make them a costly way to finance longer-term borrowing unless paired with a 0% introductory offer.

Pros and cons of a credit card

Here are the pros and cons of choosing a credit card over a HELOC.

Pros

• Unsecured loan

  If you don’t make your credit card payments on time, it will hurt your credit score. However, your assets are not at risk since your debt is not tied to collateral.

• Fast approval

  Depending on your credit history, you can get approved for a credit card in as little as a few minutes, and you’ll get a physical card in the mail in a few days.

• Several 0% offers

  Many credit cards have 0% promotional offers for up to 21 months. If you can pay off your balance before the 0% promotion ends, you can make a purchase and pay it off over time without paying interest.

Cons

• High interest rates

  Most credit card interest rates are above 20%, and promotional offers on 0% credit cards eventually end.

• No tax benefits

  You can’t deduct the interest you pay on your taxes.

0% interest credit cards

A 0% interest credit card offers an introductory period—typically between 6 and 21 months—during which no interest is charged on purchases, balance transfers, or both. This can be a useful tool for financing a large purchase or consolidating high-interest debt, as long as you have a plan to pay off the balance before the promotional rate expires.

After the 0% period ends, interest kicks in—often at a rate above 20%. By contrast, the average HELOC rate was 8.70% in November 2024, which may make a HELOC a more cost-effective option if you’ll need more time to repay. A 0% card is best for short-term borrowing when you’re confident you can pay off the balance in full before interest starts to accrue.

Can you get a 0% interest HELOC?

While HELOCs don’t typically offer 0% interest like some credit cards, a few lenders may offer introductory rate promotions—such as a low fixed rate for the first few months. However, even the most competitive HELOC intro rates rarely hit 0%, and they usually come with stricter requirements, such as excellent credit and strong equity.

HELOC vs. credit cards

Here’s how home equity lines of credit (HELOCs) compare to credit cards across key features:

Detail	HELOC	Credit card
Rates	Typically variable; average of 8.12% as of June 2025. Fixed-rate draws available with some lenders.	Variable; average over 21.37% as of July 2025. Some offer 0% promotional APR for a limited time.
Amounts	Based on home equity, credit, and lender guidelines—can be up to $2 million or more.	Based on credit and income. Most limits range from a few thousand to $25,000+, but premium cards may offer $100,000+.
Repayment terms	Two phases: draw period (interest-only payments, typically 5–10 years) and repayment period (10–20 years of principal + interest).	Monthly payments required. Interest applies to any unpaid balance after the grace period.
Best for	Large expenses like home improvements, debt consolidation, or tuition costs.	Short-term borrowing, everyday purchases, and building credit.

To understand how specific product options might work, here’s a side-by-side comparison of top-rated HELOC lender, Figure, and a popular credit card, Chase Freedom.

	Figure HELOC	Chase Freedom Unlimited
Rates (APR)	6.70% – 14.65% (fixed)	0% intro APR for 15 months, then variable APR applies
Term lengths	5, 10, 15, or 30 years	Revolving credit, no set repayment term
Loan amounts / Credit limit	$20,000 – $400,000	Varies by applicant; up to $600,000 for top-tier users
Credit score requirement	640+	670+
Max. debt-to-income ratio	50%	Not disclosed
Annual fee	None	None
Rewards	N/A	1.5% unlimited cash back on all purchases
	View Rates	View Rates

Aven HELOC card: an equity-backed credit card

The Aven HELOC Card functions like a credit card but is backed by the equity in your home, giving you access to a revolving credit line with rates lower than typical unsecured cards. You can make purchases anywhere Visa is accepted, earn cash back, and only pay interest on what you use.

Unlike a traditional HELOC, there’s no separate draw or repayment phase—repayment happens monthly based on your balance. It blends the structure of a HELOC with the ease of a credit card, offering a streamlined borrowing experience that feels like the best of both worlds. Read our full review for more details.

When is a HELOC the better option?

Here are situations when you should use a HELOC, not a credit card:

• Large home renovations
• Debt consolidation
• Long-term expenses

Large home renovations

Data from Harvard University projects homeowners will spend $477 billion on home improvements and maintenance through the third quarter of 2025. If you are among the homeowners who want to complete a large home upgrade—remodel your kitchen or update several bathrooms—a HELOC offers more flexibility and lower interest rates than a credit card. 

With a HELOC, you typically make interest-only payments first, which can be easier to manage with a large-scale purchase. And if your renovations meet specific requirements, it’s possible you can write off your interest payments on your taxes. Speak to a tax professional before hiring a contractor for your renovation to see whether this is an option. 

Debt consolidation

If you have high-interest debt, such as credit card debt or private student loans, HELOCs can be a solid option to streamline your debt and lower the amount of interest you pay over time. For example, if you have three credit cards with high balances, consolidating them into one HELOC can simplify the repayment process and save you significant money on interest.

Long-term expenses

If you want to pay for something over the long term, such as a home addition that might require payment in installments, a HELOC is a better option. Because credit card interest rates can jump to a high rate once a promotional period ends, you risk getting deep into debt at a high rate, which makes it harder to pay off.

With a HELOC, you can make payments over a long period, including starting with interest-only payments during the draw period. This can give you a runway to make purchases or upgrades at a lower interest rate.

When is a credit card the better option?

Here are situations when a credit card might be a better option than a HELOC:

• Short-term borrowing
• Small expenses
• Daily purchases 

Short-term borrowing

A credit card might be better if you plan to make a purchase you’ll pay off in full when your bill is due. If you secure a 0% interest rate for a certain period and you can pay off your balance before the promotional period ends, a credit card could be a more affordable option.

Unexpected small expenses

Credit cards can make sense for unexpected smaller expenses, such as replacing a washing machine or paying for car repairs. These are purchases you can ideally pay off in a few weeks—and they don’t require days or weeks of applying for a HELOC.

Daily purchases 

In general, credit cards are better for daily purchases. They’re convenient, and most stores accept them. Plus, having one can help you build credit if you make your payments on time and pay your balance in full each month.

FAQ

Can you transfer a HELOC balance to a credit card?

In some cases, yes—but it depends on the credit card issuer. Some balance transfer credit cards allow you to transfer funds from a HELOC if you can initiate the transfer as a direct deposit or check. However, credit card limits are usually much lower than HELOC balances, and balance transfer fees and high post-promotional interest rates may apply.

Can you use a HELOC to pay credit cards?

Yes, you can use a HELOC to pay off credit card balances. Many borrowers do this as a form of debt consolidation, taking advantage of a HELOC’s lower interest rate to replace high-interest credit card debt. Just keep in mind that since a HELOC is secured by your home, defaulting puts your property at risk.

Which is worse: a HELOC balance or credit card debt?

It depends on how the debt is managed. Credit card debt typically has higher interest rates and can grow quickly if only minimum payments are made, making it riskier financially. However, a HELOC is secured by your home—so while it may cost less in interest, it carries the added risk of foreclosure if you fall behind. Neither is inherently “worse,” but both should be used with a clear repayment strategy.

HELOC vs. credit card recap

Here’s a recap of everything you need to know about a HELOC vs. a credit card so you can make the best decision for your situation.

Detail	HELOC	Credit card
Rates	Typically variable; average of 8.12% as of June 2025. Fixed-rate draws available with some lenders.	Variable; average over 21.37% as of July 2025. Some offer 0% promotional APR for a limited time.
Amounts	Based on home equity, credit, and lender guidelines—can be up to $2 million or more.	Based on credit and income. Most limits range from a few thousand to $25,000+, but premium cards may offer $100,000+.
Repayment terms	Two phases: draw period (interest-only payments, typically 5–10 years) and repayment period (10–20 years of principal + interest).	Monthly payments required. Interest applies to any unpaid balance after the grace period.
Best for	Large expenses like home improvements, debt consolidation, or tuition costs.	Short-term borrowing, everyday purchases, and building credit.