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Ever wonder why there are so few banks offering credit cards linked to home equity loans? A new study shows that consumers are generally not motivated to use them and that banks are concerned about the risks associated with issuing cards carrying very high credit limits. The new report from TowerGroup found that 85% of all draws on “HELOC” accounts are by check, while 3% to 4% of “HELOC” draws are by credit card, and 1% to 3% by debit card. While some “HELOC” customers use the credit line to make home improvements, many others use these lines as their own universal loan account, to fund major investments from automobile purchases, to weddings, to their own retirement. Many of these major transactions do not offer a credit card payment option. Furthermore, lenders suffered high losses in the mid-90s from thieves tapping into credit cards linked to home equity lines, driving the number of institutions offering “HELOC” card access to decline from 45% in the late 1990s to less than 25% of lenders in 2003. While debit cards have been raised as a more secure card alternative, the growing number that allow signature authorization as well as PIN access are exposed to the same fraud risks as credit cards. On top of this, many consumer groups rail against credit cards connected to home equity lines of credit. Consumer advocates say credit cards encourage spending which could lead to unnecessary foreclosures.

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