I have 2 accounts that have come off of introductory interest rates recently, and now stand at 13% (Discover) and 15.9% interest (Bank of America).  I have seen my average interest rate jump from a superb 2.4% up to mediocre 12.6%.  Usually, I wait for a new balance transfer deal to come around, but I haven't had one good enough to take advantage of.  I have a Citi balance transfer offer of 0% for 9 months, but it requires a 3% fee up front.  Adjusting for the fee, the actual annual percentage rate is about 4%.  Citi also will offer me 2.99% for 15 months with the same 3% up-front fee.  That equates to about 5.4% anualized interest.

It seems that the 3% up-front fee is becoming extremely common, unfortunately, and this greatly skews the actual interest rate.  I personally believe that credit card issuers should be forced to advertise the actual annual percentage rate, just like mortgage companies must do.  Why can Citi advertise a 0% interest rate when the APR is really 4% as in my example?  Another frustrating example of credit card company tricks designed to exploit consumers.

 Anyway, I've decided to consolidate these 2 credit cards into my existing HELOC, as a temporary solution.  The balance on these 2 cards combined is around $14,600.  My HELOC is currently at a nice 3.55% interest rate, though that can increase in the future.  I have a little over $15,000 in credit available in the HELOC, and there is no fee for drawing on the HELOC funds (this is an existing HELOC, not one I'm applying for right now).

 So, what are the down-sides of using the HELOC?  I did a little research, and found that using the HELOC is not necessarily beneficial to my FICO score.  I found this article by Dr. Don Taylor on the Bankrate web site (http://www.bankrate.com/finance/savings/heloc-activity-may-affect-fico-score.aspx).  Using the HELOC to consolidate credit card debt does have an affect on the FICO score.  Dr. Don quoted Craig Watts from Fair Isaac (the creators of the FICO algorithm), who said,

"Most likely, it will affect your credit score. The FICO score is designed to treat a HELOC rather like a revolving line of credit if the loan's limit is below a preset amount, and like an installment loan if the loan's limit is above that amount. We find that this is the fairest and most accurate way to

incorporate HELOCs into score calculations. To manage any HELOC well, the borrower should use the same good credit habits that build a high FICO score: pay bills on time without exception, keep balances low and take on new credit only when it's really needed."

 Some other questions and answers:

* Does credit utilization of a HELOC negatively impact a credit score? As with any loan or revolving account, using a HELOC account will impact the person's FICO score, but often the amount of impact is small. That impact can be positive or negative depending on a variety of things, including the account balance, payment status and what other information is on the credit report.
* What happens to a credit score when a consumer uses a HELOC to consolidate credit card debt? (Let's assume that they don't cancel the credit cards.)

That depends on a variety of factors, too. Just opening the HELOC will ding the person's score a bit. If the new HELOC's balance is close to the loan's limit, that could also ding the score. On the other hand, paying off high balances on credit card accounts will usually help the person's score. And leaving the card accounts open may help the person's credit utilization rate, which is good for the score.
* Should homeowners get a HELOC for more than they need so they don't "max out" the loan? It won't hurt the person's FICO score to have a higher loan limit. This strategy might be OK if the higher limit doesn't seduce the consumer into using more credit than he or she can comfortably repay -- a big if.

Another obvious danger is that with HELOCs, the house itself is at risk if the loan payments can't be made.

In my situation, I won't have a ding for opening a new HELOC, but I will have a reduction in my FICO for increasing my HELOC balance, and also for being very close to the limit.  Of course, by eliminating balances from these two accounts, I should recover those points as soon as the balances get reported through the month.