ING Direct has a new product that can be used as a credit or debit card and that is linked to a home equity line of credit.
It is not the first time home equity accounts have been linked to a card, but such products remain uncommon. ING Direct lets people use the Orange Home Equity Line of Credit at the point of sale either as a debit card or as a credit card bearing a variable 4.75% annual percentage rate, and either way the cardholder must enter a personal identification number.
"These days, consumers like the idea of PIN-only," said David R. Lewis, the chief marketing officer for ING Direct, the U.S. branchless banking arm of the Dutch financial services giant ING Group NV. "If you lose this card, you're completely safe, because it has a PIN number." The card cannot be used as a signature debit, because there is no MasterCard or Visa logo on it.
Despite what looks like an emphasis on using the card as a debit card, "We would encourage people to use [the card] as a charge card, to be paid off at the end of the month," Mr. Lewis said.
Any balances built up are secured by the cardholder's home equity. As with more traditional home equity loans, a lien is automatically placed against the house and removed once the loan is paid off. Customers can get a loan for nearly 90% of the equity in their home, up to $250,000, can take advances from the loan for 10 years, and have 15 additional years to repay it, with no penalty for early repayment.
Mr. Lewis said feedback from focus groups prompted ING Direct, of Wilmington, Del., to develop the product. He added that people can use the Orange Home Equity Line of Credit for anything from refinancing for a mortgage to paying off credit card debts with higher rates. The account can also be linked to a checking account, so the customer could transfer money from the loan to the deposit account.
Analysts' opinions about the product were varied. Ken Kerr, a research director at Gartner Inc. of Stamford, Conn., said, "For folks who are always carrying a balance each month that is never paid off, and paying 15% to 18%, this is a really great alternative."
Keith Gumbinger, a vice president of the mortgage information publisher HSH Associates in Butler, N.J., said that the practice of attaching a credit card to a home equity account is unusual but not unique. But he said he would be wary of using a credit card attached to a home equity loan at a retail location.
"There are still concerns that allowing access by plastic trivializes to a degree the seriousness of home equity debt," Mr. Gumbinger said. "You don't want to wipe out your plastic and pay for a nice meal against the equity of your home."
