Home Equity vs. Credit Card

Test your knowledge by trying to solve this Math problem! After you complete the problem, you’ll get the solution and explanation.

Donna and Kyle need $10,000 to remodel their kitchen. They will be able to repay this in 12 months. Donna gets an offer on her credit card of 0% for 12 months with a $10,000 max and no fees.

Kyle’s college buddy Vinnie, is a mortgage broker and tells Kyle that he can get him a home equity line of credit at the Prime rate, currently 4.25%, with no application charges or other fees. Kyle tells

Vinnie that his wife has a 0% credit card offer and asks him which is better. Vinnie says that in their case the home equity line will have full tax benefits, however they would remain in the same tax bracket.

Which option is better?

The 0% credit card deal or the home-equity line of credit?