Financing home projects
Americans might have more home equity than ever before, but most aren’t tapping it to fund renovations. For those costs? Many homeowners are turning to credit cards instead, spending more than $141 billion on home improvement costs just last year.
Credit card use increases
According to a new study from Houzz and Synchrony, credit cards are playing a major role in American home renovations.
In 2017 alone, U.S. consumers charged more than $141 billion in home improvement products and services to their credit cards. This marks a 69 percent increase since 2011. In total, one in three homeowners used a credit card to pay for home improvement costs last year.
The median amount spent on home renovations was $10,000, with anywhere from $1,500 to $4,800 charged to cards, on average. On large-scale renovations — those costing $50,000 or more — 28 percent of homeowners used a credit card for at least part of the project.
Credit card usage was particularly popular with Millennial homeowners, who were the most likely cohort to use cards to fund renovation projects. Only 34 percent of Generation X homeowners used cards, while 30 percent of Baby Boomers did.
Of the homeowners who did use credit cards, 62 percent plan to pay off their balance over time, while 33 percent plan to pay it off within the year.
Renovations on the rise
Nino Sitchinava, principal economist for Houzz, said the use of credit cards is likely due to the increasing amount of renovation activity.
“Aging housing stock, low inventory of homes for sale and major demographic shifts are driving up demand for home improvements, so it is natural for consumers to look for advantageous financing methods in order to smooth out renovation spend over time,” Sitchinava said. “Based on our study, credit cards appear to be a competitive financing method for a large share of renovating homeowners, likely explaining the recent acceleration in credit usage.”
Homeowners are being clever about their credit card use, too. Nearly three-quarters of homeowners who plan to pay off their cards over time took advantage of no- or low-interest promotions. About half of all renovating homeowners used no financing at all.
Get today’s mortgage rates
Don’t let high credit card balances hurt your credit. Consider a HELOC or cash-out refinance to pay for your renovations instead. Shop around and see what refinance rates you qualify for today.