Don't trade equity line for credit card debt The Debt Adviser by Steve Bucci • Bankrate.com

Dear Debt Adviser,
I have a home equity line with a variable rate that is about 8 percent now. The balance is down to about $33,000. I have several credit cards with high limits, which are advertising low fixed rates until debt is paid. Should I move the debt into a couple of those?
-- Tuesday

Dear Tuesday,
You are not the first person to ask me this question, and my belief is that there are tens of thousands of homeowners asking the same question -- for good reason.

Until last year, we had become accustomed to interest rates falling, not rising. A huge number of homes were sold using an equity line or a mortgage that was pegged to an index. Credit card companies read the papers, too, and they have responded with fixed, low-interest-for-the-life-of-the-loan products. I want you to focus on the definition of "fixed," before you act.

The term "fixed" means different things in different contexts. A "fixed" roulette wheel, a "fixed" cat, the title of a musical release by the group Nine Inch Nails, a "fixed" interest rate subject to terms and conditions. The fixed credit card rate is subject to huge changes in the event of a default. "Who me? Default! Never!!," you may be thinking.

I'm talking about default interest rates of 30 percent. Now do I have your attention?

Many credit card agreements now contain a universal default clause that means your creditor can raise the interest rate on your credit card for a variety of technical default reasons.

Among them are:

• A late payment or missed payment on any current credit account. This would include any account that is reported to the credit bureaus, not just this account. • A change in your debt-to-available-credit ratio. Accumulating too much debt (in the eyes of the credit card issuer) in comparison to available credit may be considered a default. • Going over the credit limit on any current credit account whether on purpose or by accident. • A drop in your credit score. Bouncing a check for a credit account payment.

So, do you believe that for the length of time you will be paying off the $33,000 balance of your home equity line, you can avoid the above situations?

But wait, there's more.

More negatives with credit cards:

• When you carry a balance on a credit card, interest on new purchases may be incurred from the day of purchase without a grace period -- at a potential interest rate of 13-plus percent. • Normally any payment received on a card that has more than one balance at different interest rates will be applied to the lowest rate until it is paid off. So, purchases may accumulate interest charges for years until you retire the low-interest loan. • New rules require that balances be paid off in a much shorter time than a typical home equity line, meaning higher payments each month. • Interest charges would no longer be a tax deduction.

And although the list could go on, I won't or I'll run out of space. So, my advice is not to move the debt because a fixed rate on a credit card might not be a good thing if you are the one who ends up getting fixed. Ouch.

Good luck.

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of "Credit Repair Kit for Dummies." Visit MMI for additional debt advice or, to ask a question of the Debt Adviser, go to the "Ask the Experts" page and select "debt" as the topic.