Many Americans rely on credit cards not just for emergencies or miscellaneous expenses; but as a tool for everyday survival. This reliance on high interest credit is sinking many households deep into debt where any small emergency could topple their financial house. In a desperate attempt to stop the financial loss caused by high interest credit cards some homeowners are entering into cash-out mortgage refinances to pay off their credit cards. In a cash-out mortgage refinance the homeowner replaces their current mortgage with a mortgage that is for more than what they owe on the home and they take the difference to pay off credit card debt. For example, if a homeowner owes $100,000 on their home; but it appraises at $150,000, they may refinance for $150,000 and consolidate the credit card debt into the new loan, plus any closing costs associated with the new loan. The problem with this is that although the homeowner may get a lower interest rate for the credit card debt, he/she has also lost all of the equity in their home. It is also very common that two-thirds of those who tap into their home equity end up with more credit card debt within 2 years, according to a study by Brittain Associates.

(source: http://www.responsiblelending.org/issues/credit/reports/page.jsp?itemID=28012846)

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