Many Americans whose homes are worth considerably more than they paid for them have a comfortable amount of equity. However, when they decide to make renovations or upgrades, they’re increasingly using their credit cards rather than applying for home equity loans.
A third of home improvement expenses last year were paid for with credit cards. These weren’t just minor renovations. Over a quarter (28 percent) of renovations with a tab of at least $50,000 were paid for at least in part by credit cards. The total amount of home renovation costs that Americans used plastic for was $141 billion. This marked a rise of nearly 70 percent over the previous six years.
Those staggering numbers are detailed in a joint survey by Synchrony and Houzz. An economist with Houzz notes that renovation activity is rising for a number of reasons, including “[a]ging housing stock, low inventory of homes for sale and major demographic shifts.”
Younger homeowners (specifically millennials) are more likely to finance their renovations with credit cards than older (even GenX) ones. Almost 75 percent of homeowners surveyed who charged their renovations said they used cards featuring low-interest or zero interest promotions. However, only a third said they planned to pay off the debt in a year.
These credit card promotions can be tempting. However, when people aren’t able to pay off their balances, interest and fees can accumulate and increase an already sizable balance.
It’s easy to find yourself mired in credit card debt that impacts your entire financial well-being. If you’re in that situation, it’s wise to explore all of your options. An experienced Colorado bankruptcy attorney can be an excellent resource for guidance and information.