Homeowners Use Credit Cards Over Home Equity for Emergencies

A significant number of American homeowners are increasingly relying on credit cards to cover unexpected expenses, often overlooking home equity as a more advantageous financial tool. This trend is exacerbated by a widespread financial squeeze, with rising costs for essentials like gas and food, coupled with escalating property taxes and home insurance premiums. The Federal Reserve Bank of New York reported that total U.S. credit card debt reached $1.26 trillion after an increase of $21 billion in the second quarter of 2026, bringing outstanding balances close to the record of $1.28 trillion set in late 2025. Furthermore, the average credit card interest rate across all accounts stood at 20.94% in 2026, climbing to 22.15% for accounts actively carrying a balance, according to Federal Reserve data. This reliance on credit cards for emergencies, without immediate repayment, creates a precarious financial situation for many households.

Researchers from the New York Fed highlighted that many households live on a tight budget, making them vulnerable to financial distress from a single unexpected event. For homeowners, such events can include costly repairs like a damaged roof, a burst pipe, or damage from a fallen tree, each potentially costing thousands of dollars. Despite these significant potential costs, a survey conducted by AmeriSave revealed a striking preference for credit cards over home equity. When faced with an emergency, 64% of surveyed homeowners admitted they are more likely to use a credit card, compared to only 43% who would consider using their home equity. This is particularly notable as four out of five homeowners surveyed reported having available equity in their homes.

The AmeriSave survey also underscored the broad financial pressures impacting homeowners. Nearly four out of five homeowners (79%) reported experiencing rising utility costs over the past three years. Additionally, 45% of homeowners stated that their housing costs have outpaced their income entirely. These statistics paint a picture of a population under considerable financial strain, leading to the adoption of credit cards as a readily available, albeit expensive, solution for immediate needs. The ease of access to credit cards, often coupled with perceived benefits like cash-back or travel rewards, contributes to their widespread use, even when more sustainable options like home equity lines of credit are available and potentially more cost-effective.

Home equity, which represents the portion of a home's value that an owner has paid off or that has appreciated, offers a financial lifeline that many homeowners are not fully leveraging. Options such as home equity loans or home equity lines of credit (HELOCs) typically offer lower interest rates than credit cards, making them a more financially sound choice for larger, unexpected expenses. The fact that a majority of homeowners with available equity are opting for higher-interest credit card debt suggests a gap in financial literacy or a lack of awareness regarding these alternative funding sources. Addressing this gap could provide homeowners with a vital financial resource, helping them avoid accumulating substantial credit card debt and the associated long-term financial consequences.