If you hold a credit card, you may soon be feeling the affects of the HELOC crisis. Even if your home equity loan has been safe from freezes and limit reductions, credit card companies may raise your rates. Consumer card lenders know that HELOC options are drying up - they’re taking advantage of the fact that customers aren’t able to qualify for loans with lower rates.

USA Today explains:

During the housing boom, from mid-2001 to early 2006, banks raised card limits at a blistering pace across the nation, in part because of a surge in home equity, much of it now vanished. As home prices ballooned, banks also plied customers with a record number of offers to open new card accounts. Then they guided card borrowers to tap into rising home equity to pay off card balances with artificially inflated home equity, putting their homes at risk…

Now, even with the economy ailing, banks have continued to expand credit limits. They’re also raising more borrowers’ interest rates to as high as 30% — at a time the Fed is cutting rates — and collecting a record amount of penalty fees.

Banks are “hoping that in an atmosphere of tight credit, these people will have nowhere to go and be forced to pay high interest on their card balances,” says Elizabeth Warren, a Harvard law professor. “It’s a straightforward profit calculation.”

Keep an eye on your statements during the next few months; some credit card companies have already raised their rates.

See Also:

How the HELOC Freeze Can Damage Your Credit Score

Will a HELOC Affect My Credit Score?

Tags | Heloc, home equity line of credit, mortgage crisis